On 1 July 2026, the Supreme Court handed down judgment in Commissioners for His Majesty’s Revenue and Customs v BlueCrest Capital Management (UK) LLP [2026] UKSC 18, the first case on the Salaried Member rules for UK LLPs. The appeal concerned Condition A (disguised salary) and Condition B (significant influence). It was common ground that Condition C (capital contribution) was met for all UK LLP members.
Where Conditions A, B and C are all met, the Salaried Member rules treat a UK LLP member as an employee for UK income tax and National Insurance contributions (NIC) purposes creating income tax payroll withholding (PAYE) and employer NIC liabilities, and bringing members within the scope of the Employment Related Securities rules.
The Supreme Court unanimously found in favour of HMRC, dismissed all of BlueCrest’s appeals, and found that all of the members under appeal should be re-classified to be employees for UK tax purposes. Only four LLP members were treated as self-employed by virtue of failing Condition B. There is approximately £200 million of tax at stake for the LLP, for National Insurance charges arising from being a deemed employer.
There will be another hearing (at the First-tier Tribunal (FTT)) to consider this case further based on the principles established by the Supreme Court, which has not yet been scheduled.
All businesses operating as UK LLPs should review their Salaried Members Rules position in light of the principles established by the Supreme Court as this will be an area of focus for HMRC going forward.
What the Supreme Court decided
Condition A
Condition A is met if it is reasonable to expect that at least 80 percent of the compensation paid to the individual in a year will be ‘disguised salary’. ‘Disguised salary’ means any amount which is either: (a) fixed; (b) variable, but without reference to the profits of the LLP; or (c) not, in practice, affected by the overall amount of those profits.
The Supreme Court upheld the decisions of the lower Courts. In this case, remuneration comprised several elements, including ‘discretionary allocations’ and the key question was whether this particular element constituted disguised salary.
Notably, the Court found that the fact that total profit allocations were ‘capped’ by the total profits of the LLP was insufficient to mean that they varied with reference to the profits of the LLP in this case, and so were disguised salary.
Condition B
Condition B is met if the mutual rights and duties of the members and the LLP do not give a member significant influence over the affairs of the LLP.
Most of the judgment focussed on Condition B and the Supreme Court agreed with the Court of Appeal that the lower Courts had approached the interpretation of significant influence incorrectly. It upheld that the Court of Appeal was correct to remit the case to the FTT in respect of Condition B and that no further evidence may be submitted by either party.
The Supreme Court confirmed the Court of Appeal’s finding that Condition B is concerned with legally enforceable rights and duties arising from an LLP’s constitutional and governance arrangements (‘qualifying’ influence) but does not necessarily need to be stated in those documents. For instance, an individual or committee with qualifying influence which derives from the LLP Agreement can delegate that authority to other members or committees, and this would also be qualifying influence for those individuals.
The next question is whether those rights and duties give a member significant influence over the affairs of the UK LLP, viewed as a whole. In most cases, significant influence is likely to involve participation in strategic or managerial decisions affecting the LLP. Operational responsibility for part of the business or day to day management is less likely to qualify.
What this means for LLPs
Where a UK LLP member is relying on failing Condition B, particularly where the factual position has similarities to BlueCrest, we recommend reviewing the legal documents governing the LLP and the rights and duties of the members. A key question is whether a member’s influence is traceable to meaningful legal rights and duties within the LLP’s governance framework and whether there is sufficient contemporaneous evidence to support the tax analysis undertaken.
The Court of Appeal’s decision, now endorsed by the Supreme Court, means that firms can take proactive steps by reviewing their LLP Agreement, any additional supporting agreements, and both the methodology for assessing these conditions and the testing documentation, to identify whether individuals might fail any of the three conditions in the legislation.