Supreme Court backs HMRC in landmark BlueCrest salaried members ruling

The Supreme Court has unanimously dismissed an appeal by hedge fund manager BlueCrest Capital Management (UK) LLP, in a dispute with HMRC worth approximately £142 million in PAYE and £55.3 million in National Insurance contributions.

The dispute

The case, Commissioners for HMRC v BlueCrest Capital Management (UK) LLP [2026] UKSC 18, turned on the "salaried members" rules introduced by the Finance Act 2014. These rules, found in sections 863A to 863G of the Income Tax (Trading and Other Income) Act 2005, were designed to stop limited liability partnerships being used to disguise what is, in substance, an employment relationship as a partnership — allowing individuals to benefit from partner-style tax treatment despite having little real stake or influence in the business.

An LLP member is treated as an employee for tax purposes if they meet three conditions. Condition A looks at whether their pay counts as "disguised salary" — broadly, remuneration that is fixed, or varies without reference to the LLP's overall profits or losses. Condition B looks at whether the member has "significant influence" over the affairs of the partnership. Condition C, not at issue in this appeal, concerns capital contributions.

BlueCrest, which primarily invests money for the wider BlueCrest Group co-founded by Michael Platt, had 82 individual members as of 3 April 2014, 16 of whom held infrastructure roles including membership of the original executive committee. HMRC concluded that all but those four executive committee members met the conditions for the salaried members rules to apply across the five tax years from 2014 to 2019. On that basis, HMRC issued PAYE determinations totalling approximately £142 million, alongside a decision that BlueCrest was liable for Class 1 National Insurance contributions of approximately £55.3 million for the same period.

BlueCrest challenged this at every stage. The First-tier Tribunal found that the relevant members met Condition A, but that most portfolio managers with capital allocations of at least $100 million, along with desk heads, had sufficient influence to fail Condition B — meaning they were not caught by the rules. The Upper Tribunal upheld that approach. The Court of Appeal disagreed, ruling that the First-tier Tribunal had wrongly taken account of members' informal or de facto influence rather than influence derived from their legal rights under the LLP Agreement, and sent the case back for reconsideration. BlueCrest then appealed to the Supreme Court.

What the court decided on influence

The Supreme Court, in a judgment given by Lord Richards and Lady Simler with which Lord Briggs, Lord Hamblen and Lord Burrows agreed, upheld the Court of Appeal's approach to Condition B. The court held that "significant influence" must be assessed by reference to the mutual legal rights and duties of members under the LLP Agreement, not by reference to influence a member might carry informally because of their personal qualities, relationships or strong individual performance.

The judgment clarifies that the necessary influence generally requires some form of participation in high-level or strategic decision-making affecting the partnership's affairs as a whole. Day-to-day operational decisions — even commercially significant ones, such as placing multi-million-pound trades — are not, of themselves, evidence of the kind of influence the legislation requires. Because the First-tier Tribunal had focused on members' informal influence arising from their investment responsibilities rather than their formal rights under the LLP Agreement, its conclusions on Condition B were flawed, and the Supreme Court agreed the case should return to the First-tier Tribunal for reconsideration under the correct legal test.

What the court decided on disguised salary

BlueCrest also argued that its members failed Condition A, on the basis that their discretionary pay allocations were capped by reference to the LLP's total annual profits — meaning, it argued, that pay did vary with the firm's overall profits. The Supreme Court rejected this. It held that a profit-based cap of this kind does not, on its own, amount to the kind of profit-sharing arrangement that distinguishes a genuine partner from an employee, and that BlueCrest's reading of Condition A was "so far divorced" from the provision's purpose that it could not stand.

Implications

This ruling gives LLPs, and the professional advisers who structure them, considerably more certainty on how "significant influence" should be assessed — and it sets a noticeably higher bar than some firms may have assumed. Strong individual performance, seniority in practice, or a reputation for calling the shots on major deals will not, by themselves, be enough to keep a member outside the salaried members rules. What matters is what the LLP Agreement actually grants that member in terms of formal, legally enforceable rights over the partnership's strategic affairs as a whole.

Investment management LLPs and other partnership structures using discretionary, profit-capped remuneration models should review their LLP Agreements against this test, since informal arrangements and unwritten expectations about a member's influence will carry no weight if a dispute with HMRC arises. The case also underlines that a profit cap alone will not rescue a remuneration structure from being treated as disguised salary. With BlueCrest's case now returning to the First-tier Tribunal for reconsideration, the practical outcome for its own members — and the resulting PAYE and NIC liability — remains to be determined.