Introduction
On 1 July 2026 the Supreme Court handed down its judgment in HMRC v BlueCrest Capital Management (UK) LLP, dismissing BlueCrest’s appeal and bringing the dispute to an end. The amounts at stake were certainly significant: PAYE of around £142 million and Class 1 NIC of around £55 million.
The salaried members rules in outline
The salaried members rules were introduced by Finance Act 2014 and are to be found in sections 863A to 863G of the Income Tax (Trading and Other Income) Act (‘TTOIA’) 2005. Their effect is to treat a member of an LLP as an employee for tax purposes where three conditions are all met.
Condition A is that at least 80% of the member’s expected remuneration is ‘disguised salary’, min other words, it is fixed or varies without reference to the overall profits or losses of the LLP.
Condition B is that the member’s rights and duties do not give him or her significant influence over the affairs of the partnership.
Condition C is that the member’s capital contribution is less than 25% of their expected disguised salary. Fail any one condition and the member remains taxed as a partner.
The journey to the Supreme Court
The First-tier Tribunal found in 2022 that members who were portfolio managers with capital allocations of $100 million or more, together with desk heads, did have significant influence over BlueCrest’s affairs as a consequence which meant that Condition B was not met. The Upper Tribunal agreed with this conclusion. However, the Court of Appeal reversed that decision in January 2025, holding that the tribunals had taken too broad a view of what counted as significant influence. The Supreme Court has now upheld the Court of Appeal’s decision and remitted the case to the First-tier Tribunal to apply the correct test, with no further evidence to be filed.
Condition A: disguised salary or not?
BlueCrest argued that discretionary allocations calculated by reference to the contributions to profit generated by individual portfolio managers fell outside the definition of disguised salary, because total allocations were capped by reference to the firm’s overall profits. However, the cap was never actually triggered. The Supreme Court rejected the argument. Many LLPs reward members on an ‘eat what you kill’ basis, and this part of the judgment confirms that such arrangements will meet Condition A.
Condition B: only rights as a member matter
One of tbe central elements in the judgment is the meaning of ‘significant influence’ for the purposes of Condition B. The Supreme Court confirmed that
First, to be relevant, that influence must derive from the member’s legally enforceable rights and duties as a member of the LLP. De facto influence within the business arising from seniority, expertise, profitability or commercial standing is irrelevant for this purpose.
Second, the influence must be over the affairs of the LLP as a whole, in terms of managerial or strategic decision-making about the firm generally. Operational decision-making confined to one part of the business will not.
Third, influence does not connote control. A member does need not be able to dictate outcomes, but his or her influence must still be significant, and where the LLP agreement concentrates decision-making in a board or executive committee, members outside those committees are unlikely to have the required degree of influence.
Three actions are now necessary for affected LLPs..
The first is to review the LLP agreement, to establish what rights and duties members actually have and whether the influence hitherto claimed for particular individuals is actually attributable to them.
The second is to look at the governance structure, since decision-making concentrated in an executive board or committee weakens the Condition B position of everyone who is not on it.
The third is the remuneration model, because performance-linked allocations will usually meet Condition A, leaving capital contributions under Condition C as the only reliable escape route for many members. This is likely to be the most difficult problem in many cases, as there may be tensions between the tax and commercial imperatives.
The fact is that the Supreme Court’s interpretation of the salaried members rules is more restrictive than the interpretation previously favoured even by HMRC. Urgent review is therefore required by affected LLPs before HMRC runs the review for them with possibly expensive consequences.