Commissioners for His Majesty’s Revenue and Customs v BlueCrest Capital Management (UK) LLP

The salaried-members regime treats an LLP member as an employee for tax purposes only when all three statutory conditions are met. Condition B concerns significant influence derived from legally enforceable mutual rights and duties, including delegated authority or a formal role traceable to the LLP agreement. Informal influence, personal qualities and performance do not supply the required source. The influence must concern the affairs of the LLP as a whole and will usually involve managerial or strategic participation; responsibility for a merely operational part is insufficient. Under Condition A in the Income Tax (Trading and Other Income) Act 2005, remuneration based on an individual’s or team’s profits remains disguised salary where it is not substantially linked to the LLP’s overall profits or losses, even if subject to a firm-wide cap.

HMRC assessed BlueCrest, an investment-management LLP, for PAYE and national insurance contributions on the basis that most individual members were salaried members. The First-tier Tribunal found Condition A satisfied for all relevant members, but found Condition B unsatisfied for portfolio managers with capital allocations of at least $100m and desk heads. The Upper Tribunal upheld that decision: [2022] UKFTT 204 (TC); [2023] UKUT 232 (TCC).

The Court of Appeal dismissed BlueCrest’s cross-appeal on Condition A, allowed HMRC’s appeal on Condition B and remitted the issue to the First-tier Tribunal: [2025] EWCA Civ 23. The Supreme Court considered the proper interpretation of Conditions A and B, including the source and scope of significant influence and whether discretionary allocations were disguised salary.

Lord Richards and Lady Simler delivered the judgment, with which Lord Briggs, Lord Hamblen and Lord Burrows agreed. The appeal was dismissed on both Conditions A and B. The question whether Condition B was satisfied for any or all members was remitted to the First-tier Tribunal.

1. Interpretation. Statutory meaning is determined from the objective meaning of the enacted words, read in their statutory context and in light of the legislation’s purpose. The words of the statute remain primary. Explanatory and other external materials have a secondary role and cannot displace clear statutory language.
2. Condition B. Qualifying influence must derive from legally enforceable mutual rights and duties between members and the LLP. Those rights may arise from the LLP agreement, statute, implied terms, common law or equity, and may include delegated authority or a formal role traceable to the agreement. Informal or de facto influence, personal qualities, commercial reputation, performance and relationships with customers are not sources of qualifying influence, although the nature and extent of such matters may assist in evaluating the significance of legally sourced influence.
3. Influence does not require control or an ability to dictate outcomes. It is sufficient to have a right to participate in important decisions capable of affecting the LLP’s affairs. “Significant” adds practical and commercial substance. The affairs of the LLP are viewed generally and as a whole. The relevant influence will usually be managerial or strategic. Day-to-day operational responsibility for one part of the business, including investment decisions within an individual portfolio, does not ordinarily suffice.
4. The First-tier Tribunal had treated de facto arrangements, personal qualities, financial contribution and operational performance as sources of influence. It had also failed to examine the LLP agreement, particularly the allocation of governance powers to the Board and UK ExCo. These were material errors going to the heart of Condition B, so the remittal was appropriate. Board and UK ExCo members were plainly given significant influence; the position of other members required reconsideration.
5. Condition A. Discretionary allocations to portfolio managers and desk heads were calculated by reference to individual or team profits, not the overall profits or losses of BlueCrest. A policy capping total allocations by BlueCrest’s total profits did not make those payments variable by reference to the LLP’s overall profits for section 863B(3), Step 2(b). The payments therefore constituted disguised salary, making it unnecessary to consider Step 2(c).

The Court of Appeal’s remittal order was amended to refer to the Supreme Court’s judgment. The direction restricting the evidence on remittal was left undisturbed.

• United Kingdom Supreme Court: Appeal dismissed on Conditions A and B; the Condition B issue remitted to the First-tier Tribunal.
• Court of Appeal: Appeal by HMRC allowed on Condition B and BlueCrest’s cross-appeal on Condition A dismissed; Condition B remitted: [2025] EWCA Civ 23.
• Upper Tribunal (Tax and Chancery Chamber): Appeal and cross-appeal dismissed: [2023] UKUT 232 (TCC); [2023] STC 1642.
• First-tier Tribunal (Tax Chamber): Condition A found satisfied for the relevant members; Condition B found unsatisfied for portfolio managers with capital allocations of at least $100m and desk heads: [2022] UKFTT 204 (TC).