Summary
In this case, the Supreme Court considered whether members of BlueCrest LLP should be treated as employees rather than partners for tax and National Insurance (“NIC”) purposes under the LLP “salaried members” rules1. That legislation deems an LLP member to be an employee for tax purposes only if all three statutory conditions are met2.
(i) The first condition (section 863B) concerns the nature of the member’s receipts and is met if a member’s remuneration from the LLP is (a) fixed or (b) is variable but is varied without reference to the profits or losses of the partnership or (c) is not in practice affected by the overall amount of those profits or losses (“Condition A”).
(ii) The second condition (section 863C) concerns a member’s influence and is met if a member does not have significant influence over the affairs of the LLP (“Condition B”).
(iii) The third condition (section 863D) concerns capital contribution to the LLP (“Condition C”).
Condition C was met by all BlueCrest members and, accordingly, only Conditions A (whether members were paid “disguised salary”) and B (whether members had “significant influence” over the LLP’s affairs) were in dispute. HMRC sought combined PAYE and NIC liabilities of approximately £142m and £55.3m respectively (around £197m in total).
Condition A
BlueCrest argued that, because discretionary allocations were capped by firm-wide profits, they were, or were capable of being, varied by reference to the LLP’s overall profits or losses, therefore falling outside the “disguised salary” limb of the statutory test3.
The Supreme Court rejected this argument. Condition A asks whether remuneration reflects the traditional partnership characteristic of members sharing in the firm’s overall profits and losses. Because the remuneration of relevant portfolio managers and desk heads was determined principally by their own or their team’s performance and was not substantially affected by BlueCrest’s overall profits, it satisfied Condition A. The Supreme Court therefore regarded their remuneration as characteristic of employee-style remuneration for the purposes of the statutory test4.
Condition B
The Supreme Court confirmed that Condition B must be assessed by reference to legally enforceable rights and duties – under the LLP Agreement, statutory provisions, delegated authority – rather than influence exercised merely as a matter of fact or informal practice. The FTT had erred by treating the portfolio managers’ and desk heads’ operational, financial and de facto influence as sufficient, without properly examining whether that influence derived from such a source5.
The Supreme Court nevertheless accepted that such rights could arise through a member’s formal role or delegated authority where it traced back to the LLP’s legal framework. However, influence arising merely from an important operational or day-to-day role, including investment decisions affecting profitability, is insufficient. The Supreme Court therefore concluded that the FTT had erred in treating informal or de facto influence outside the LLP’s governance structure as capable of satisfying Condition B6.
Because the FTT’s error was material to its conclusion, the Condition B issue was properly remitted to the FTT for reconsideration, meaning the Supreme Court did not itself determine whether the individual members ultimately satisfied Condition B.
Judgment
The Supreme Court dismissed BlueCrest’s appeal. It held that Condition A was satisfied, and remitted the issue of Condition B to the FTT for factual reconsideration under the corrected legal test, meaning the ultimate quantum of BlueCrest’s PAYE and NIC liability is still to be resolved7. That determination will depend on the FTT’s reapplication of the Condition B test, and will provide practical guidance on where the line will be drawn.
Analysis
The Supreme Court’s judgment refines the Court of Appeal’s interpretation of significant influence, in particular, narrowing the Condition B test.
It confirms that legal and constitutional significance will be determinative, over commercial significance. Under Condition A, a firm-wide cap operates as a commercial constraint, rather than a legal profit-share. Under Condition B, operational influence constitutes commercial weight rather than constitutional authority (such as voting rights or committee membership). This distinction is likely to be applied rigorously in subsequent applications of the salaried members rules.
The decision also has practical implications for how LLPs structure remuneration mechanics and governance documentation. For example, firms that have relied on profit-referenced caps as a safeguard against Condition A should reconsider that position, since the cap must genuinely govern the calculation of remuneration rather than merely limit a pool that is otherwise driven by individual or team performance.
Meanwhile, members whose influence derives from seniority or de facto practice (rather than documented delegated authority) are now at risk of failing to satisfy Condition B, despite the commercial significance of their role. This has particular resonance for asset managers and hedge fund managers, where members are frequently responsible for substantial investment decisions and profits, factors the Court has confirmed will not, without more, amount to significant influence.
Footnotes
1. Sections 863A–863G of the Income Tax (Trading and Other Income) Act 2005
2. BlueCrest Capital Management (UK) LLP v Revenue and Customs Commissioners [2026] UKSC 18 [2]
3. Section 863B(3) of the Income Tax (Trading and Other Income) Act 2005
4. BlueCrest Capital Management (UK) LLP v Revenue and Customs Commissioners [2026] UKSC 18 [128-134]
5. BlueCrest Capital Management (UK) LLP v Revenue and Customs Commissioners [2026] UKSC 18 [104]
6. BlueCrest Capital Management (UK) LLP v Revenue and Customs Commissioners [2026] UKSC 18 [70–92, 104–105, 118–124]
7. BlueCrest Capital Management (UK) LLP v Revenue and Customs Commissioners [2026] UKSC 18 [137]
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