On 1 July 2026 the Supreme Court handed down its judgment in HMRC v BlueCrest Capital Management (UK) LLP [2026] UKSC 18. The Court unanimously dismissed BlueCrest’s appeal, upholding the Court of Appeal’s approach to the “salaried members” rules and sending the case back to the First-tier Tribunal to be reconsidered on the correct legal basis.
This is the first case on the salaried members rules to reach the Supreme Court since they were introduced in 2014. It will not stay confined to hedge funds and asset managers. Any professional practice run as an LLP – law firms, accountants, surveyors, architects, medical and dental groups – needs to understand what has changed and check its own house is in order.
A quick reminder of the rules:
The salaried members rules (Part 9A, Income Tax (Trading and Other Income) Act 2005) exist to stop firms disguising what is really an employment relationship as self-employed membership of an LLP. An individual member of an LLP is treated as an employee for tax and National Insurance purposes if they fail all three of the following conditions:
| Condition A | The member is not entitled to remuneration that is a genuine share of the LLP’s overall profits (i.e. 80% or more of their expected pay looks like disguised salary). |
| Condition B | The member does not have significant influence over the affairs of the LLP. |
| Condition C | The member’s capital contribution is less than 25% of their expected disguised salary. |
A member only needs to fail one of these three conditions to remain outside the rules and keep self-employed tax treatment. Get the analysis wrong and the LLP is exposed to employer’s National Insurance, PAYE and potentially penalties and interest, on top of the member’s own tax position.
What the Supreme Court decided
BlueCrest had already conceded Condition C, so the case turned on Conditions A and B.
| Condition A | BlueCrest paid its portfolio managers discretionary allocations calculated by reference to profits they, or their own desk, personally generated, subject to an overall cap tied to the LLP’s total profits. BlueCrest argued that cap was enough to make the allocations a genuine share of partnership profit. The Supreme Court disagreed. Remuneration calculated primarily by reference to an individual’s own performance can still be disguised salary, even where an overall profits cap sits in the background and is never actually triggered. Genuine partnership (or membership of an LLP) means sharing in the fortunes of the whole business, not receiving capped, formula-driven pay tied to your own book. |
| Condition B | This is where the judgment matters most. The Court held that “significant influence” must be grounded in a member’s legally enforceable rights and duties as a member, set out in the LLP agreement itself or delegated under it, rather than informal, de facto influence arising from day-to-day seniority or commercial importance. The Court also confirmed that the influence in question must relate to the affairs of the LLP as a whole, not just to one part of the business, however important that part is. Running a core team, generating significant revenue or being commercially indispensable is not, on its own, enough. What counts is whether the LLP agreement actually gives that person a documented voice in the strategic direction of the firm. |
Why this affects your practice, not just asset managers
The reasoning in BlueCrest is not confined to portfolio managers and traders. It applies to any professional LLP with:
- Fixed-share, salaried, or capped/formulaic partners whose pay is tied to their own or their team’s billings or performance, rather than the firm’s overall profit;
- Partners whose “influence” rests mainly on running a department, office or practice area, without documented governance rights at a firm level;
- LLP Agreements that have not been updated to reflect how the firm is actually run in practice or that give junior or fixed-share partners only limited voting and information rights.
If HMRC challenges a firm’s treatment of its salaried or fixed-share members, the starting point will now be the LLP Agreement as written, tested against how the firm genuinely operates. Informal arrangements, un-minuted practice, or “it’s understood that…” will carry much less weight than before.
Our call to action: Review your LLP Agreement now
Do not wait for an HMRC enquiry to find out where your firm stands. We recommend every LLP now reviews:
- Remuneration structures: Are any members paid primarily by reference to their own performance or their team’s billings, dressed up with an overall profit cap that is rarely, if ever, engaged?
- Governance and voting rights : Do fixed-share, salaried or junior partners, as well as equity partners, have genuine, documented rights to participate in strategic decisions affecting the firm as a whole, or only operational control over their own department or a requirement to be consulted?
- Consistency between the agreement and practice: Does the LLP Agreement reflect how the firm is actually managed, or has practice moved on without the paperwork catching up?
- Capital contributions: For members who cannot clearly pass Conditions A or B, is Condition C reliably met, and is that capital genuine equity rather than disguised remuneration?
This is a governance exercise as much as a tax one. A well-drafted, properly implemented LLP Agreement, with real strategic rights for the members who need them, is the clearest protection against a challenge under these rules.
If you would like us to review your LLP Agreement in light of the BlueCrest decision, get in touch. This is exactly the kind of restructuring and governance work we do for professional practices every day.
Please note that this article is a general summary of a Supreme Court decision and does not constitute legal or tax advice. Please contact us before taking any action in relation to your own LLP structure.
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