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

Factual and Procedural Background

This Supreme Court appeal concerned the interpretation and application of the UK “salaried members legislation” (introduced by the Finance Act 2014 and inserted into the Income Tax (Trading and Other Income) Act 2005 (“ITTOIA 2005”), ss 863A–863G). The regime determines whether an individual member of a limited liability partnership (“LLP”) is treated as a partner or as an employee for income tax and national insurance contributions (“NICs”).

The Respondent (a government tax authority, “Government Agency”) determined that, for tax years 2014–2019 inclusive, all but four individual members of the Appellant LLP (“Company A”) were “salaried members” and therefore subject to PAYE and Class 1 NICs. Government Agency issued PAYE determinations under regulation 80 of the Income Tax (Pay As You Earn) Regulations 2003 totaling approximately £142m and a NICs decision totaling approximately £55.3m.

Company A appealed to the First-tier Tribunal (Tax Chamber) (“FTT”) and also brought judicial review proceedings (stayed pending the tax appeals). It was common ground throughout that Condition C (capital contribution) was met by all relevant members, leaving Conditions A (disguised salary) and B (significant influence) in issue.

In 2022, the FTT dismissed Company A’s appeal on Condition A but allowed it on Condition B for certain investment personnel (portfolio managers with capital allocations of at least $100m and desk heads), holding they had significant influence and thus failed Condition B. In 2023, the Upper Tribunal dismissed both sides’ appeals, holding there was no error of law.

In 2025, the Court of Appeal dismissed Company A’s cross-appeal on Condition A and allowed Government Agency’s appeal on Condition B, holding that qualifying “influence” for Condition B must derive from the LLP’s mutual rights and duties within the statutory/contractual framework, not from informal “de facto” arrangements. The Court of Appeal remitted Condition B to the FTT for reconsideration under the correct test.

In 2026, the Supreme Court (Judge Richards and Judge Simler giving the judgment, with whom the other Justices agreed) dismissed Company A’s appeal on both Condition A and Condition B and upheld remittal of Condition B to the FTT (with a minor amendment to reference the Supreme Court judgment as well).

Legal Issues Presented

1. How should Condition B (ITTOIA 2005, s 863C) be interpreted, in particular whether “significant influence over the affairs of the partnership” can be established by de facto influence or must be grounded in legally enforceable mutual rights and duties within the LLP’s constitutional framework?
2. Whether the FTT made a material error of law in its application of Condition B by treating informal/de facto influence and operational activity as sufficient, and whether remittal to the FTT was appropriate?
3. How should Condition A (ITTOIA 2005, s 863B) be applied to Company A’s remuneration structure, specifically whether discretionary allocations subject to a cap linked to overall LLP profits were “varied without reference to the overall amount of the profits or losses” (Step 2(b))?

Arguments of the Parties

Appellant's Arguments

• On Condition B, the Appellant sought reinstatement of the FTT’s conclusion that certain investment personnel failed Condition B because they had significant influence, contending the FTT’s analysis was rooted in those members’ formal roles (which were said to be traceable to the LLP Agreement and delegated authority).
• The Appellant argued that influence could be significant even if exercised over a core part of the business rather than across the LLP’s affairs as a whole, and criticized what it characterized as a requirement for strategic-level decision-making.
• On Condition A, the Appellant argued discretionary allocations were not “disguised salary” under Step 2(b) because there was a policy that allocations would be reduced if total allocations exceeded Company A’s total profits (making overall profits a cap and therefore a reference point).

Respondent's Arguments

• The Respondent’s position in the tribunals accepted that de facto influence could qualify for Condition B; however, the Supreme Court proceeded on the correct interpretation that qualifying influence must derive from legally enforceable mutual rights and duties, excluding informal influence lacking a legal source.
• On Condition A, the Respondent contended the discretionary allocations were determined by reference to individual or desk performance rather than overall LLP profits and therefore fell within Step 2(b).

Interveners' Submissions

• Industry Association 1 and Industry Association 2 (written submissions only) supported the Appellant, emphasizing the need for clarity and certainty and contending the Court of Appeal erred in its interpretation of Conditions A and B.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
R (Quintavalle) v Secretary of State for Health [2003] UKHL 13; [2003] 2 AC 687	Objective statutory interpretation: meaning of words in light of context and purpose; statutory text primary.	Used to restate the established approach to interpreting Conditions A and B.
R(O) v Secretary of State for the Home Department [2022] UKSC 3; [2023] AC 255	Primacy of statutory language; context within the Act; external aids secondary and cannot displace clear wording; citizens should be able to rely on the text.	Central authority for interpretive methodology and for emphasizing certainty and prospective workability of the statutory tests.
R v Secretary of State for the Environment, Transport and the Regions, Ex p Spath Holme Ltd [2001] 2 AC 349	Constitutional rationale for clarity of statutory language (quoted via R(O)).	Supported the court’s insistence on objectivity and prospective applicability of Conditions A–C.
R (PACCAR Inc) v Competition Appeal Tribunal [2023] UKSC 28; [2023] 1 WLR 2594	Statutory words read in their section and wider statutory context.	Reinforced contextual interpretation of the salaried members provisions.
Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497	Example of common law employment status test (as part of legislative background).	Referenced to explain that the legislature rejected using employment-status tests in favour of a new tripartite statutory test.
Professional Game Match Officials Ltd v Revenue and Customs Comrs [2024] UKSC 29; [2024] ICR 1480; [2025] 1 All ER 2892	Modern illustration of common law employment status analysis (background).	Used to contextualize the legislative choice not to adopt the common law employment status test.
Stekel v Ellice [1973] 1 WLR 191	“Salaried partner” label not determinative; substance of relationship; participation in important decisions as indicator of partnership.	Used to show the statutory Conditions broadly reflect partnership indicators, particularly Condition B’s focus on management participation.
Tiffin v Lester Aldridge LLP [2012] EWCA Civ 35; [2012] 1 WLR 1887; [2012] 2 All ER 1113	Indicators of partnership include capital contribution, profit participation, and “a voice in the management of the affairs” of the LLP.	Used to inform the construction of Condition B as reflecting rights to participate in management decisions (typically strategic/managerial).
Seramco Ltd Superannuation Fund Trustees v Income Tax Comr [1977] AC 287	Courts should not paraphrase/replace ordinary statutory words with judicial glosses.	Supported the court’s reluctance to define “significant”, “influence”, and “affairs” by substitutes rather than ordinary meaning in context.
R v Board of Trade, Ex p St Martins Preserving Co Ltd [1965] 1 QB 603	Broad meaning of “affairs of a company”.	Applied by analogy to interpret “affairs of the partnership” broadly, while still requiring influence over the LLP’s affairs viewed as a whole.
Badeley v Consolidated Bank (1888) 38 Ch D 238	Referenced in discussing profit-sharing not being essential to partnership status (historical context via Lindley).	Used as part of the court’s explanation of partnership concepts relevant to the purpose of Condition A.
M Young Legal Associates Ltd v Zahid [2006] EWCA Civ 613; [2006] 1 WLR 2562	Fixed remuneration can still be consistent with partnership; lack of direct profit link often negative pointer.	Supported the court’s explanation that Condition A aims to distinguish typical partner remuneration from employee-like remuneration.

Court's Reasoning and Analysis

Interpretation methodology. The court reaffirmed that statutory interpretation focuses primarily on the enacted words, read in context and in light of legislative purpose; external aids may assist but cannot override clear text. The salaried members conditions are objective and intended to be workable and applied prospectively for tax compliance and certainty.

Condition B (s 863C): source and nature of qualifying influence. The court held that Condition B focuses on whether a member’s “significant influence” is given by “the mutual rights and duties” of the members and the LLP. Those rights and duties are legally enforceable rights arising from the statutory/contractual framework (including implied terms and relevant common law/equitable rights and duties). Influence that cannot be traced to an identifiable legal source is excluded, including influence arising from informal, de facto, or external arrangements, or “soft power” stemming from personal standing, relationships, or performance.

The court accepted that qualifying influence is not confined to the literal text of the written LLP agreement: it may arise through delegated authority or appointment to roles whose authority can ultimately be traced back to the LLP’s constitutional arrangements. However, the influence must still be management-type influence over the LLP’s affairs viewed as a whole, typically through rights to participate in important decisions (often strategic/managerial). Operational decision-making in a confined part of the business—even if core to profitability—does not, without more, amount to significant influence over the LLP’s affairs generally.

Condition B applied: error of law below and remittal. The court concluded the FTT (and Upper Tribunal) materially erred by treating de facto influence and operational performance (including financial contribution and day-to-day investment discretion) as sufficient. The FTT’s analysis did not engage properly with the LLP Agreement’s governance structure, which vested management and control in the board and delegated committees, and gave individual members minimal governance rights. Because the errors went to the heart of the assessment, the Court of Appeal was correct to remit the Condition B application to the FTT for reconsideration under the correct construction (and the Supreme Court saw no basis to interfere with the Court of Appeal’s evidential direction).

Condition A (s 863B Step 2): disguised salary. The court addressed whether discretionary allocations were “varied without reference to the overall amount of the profits or losses” of Company A (Step 2(b)). Although there was a policy under which total discretionary allocations would be reduced if they exceeded total LLP profits (a cap that, in practice, never operated), the court held this did not alter the character of the remuneration: it was determined by reference to individual/desk profit performance rather than overall LLP profits. A literal reading that treated an unused overall-profit cap as a sufficient “reference” was rejected as inconsistent with the statutory purpose of distinguishing partner-like profit sharing from employee-like remuneration. The court therefore held the discretionary allocations fell within Step 2(b), making Condition A satisfied for the relevant members; it was unnecessary to consider Step 2(c).

Holding and Implications

DISMISSED. The Supreme Court dismissed the appeal on both Condition A and Condition B.

The direct effect is that the Court of Appeal’s order stands: the question whether Condition B is satisfied for any or all relevant members must be reconsidered by the FTT under the correct legal test (with the remittal order amended to refer to the Supreme Court judgment as well as the Court of Appeal’s). Condition A was resolved against the Appellant on the interpretation of “disguised salary” in Step 2(b). The judgment provides authoritative guidance on construing Conditions A and B, but the ultimate factual application of Condition B for the members concerned remains to be determined on remittal.