Michael Platt's BlueCrest Capital Management lost a significant legal battle with HM Revenue & Customs (HMRC) over the tax treatment of its senior traders, leading to a potential £200 million tax bill. The dispute centered on the application of the UK's "salaried members rules," which determine whether members of limited liability partnerships (LLPs) should be treated as self-employed or as "disguised employees" for tax purposes. BlueCrest had argued that its senior traders, managing over $100 million in capital, exercised significant influence over the firm and should thus be taxed differently, but the courts sided with HMRC.
The case has seen multiple rulings, starting in March 2021 with the First-Tier Tribunal (FTT) delivering a split decision. The FTT found that discretionary bonuses linked to individual performance were "disguised salary" but also acknowledged the significant influence of BlueCrest's portfolio managers. The Upper Tribunal largely upheld these findings in June 2023. However, the Court of Appeal overturned elements of these rulings in November 2024, ordering a rehearing under a more stringent legal test.
Ultimately, the High Court and then later the Supreme Court sided with HMRC, classifying many of BlueCrest's LLP members, excluding a small number of executive committee figures, as salaried members. This means they are subject to income tax and National Insurance contributions, leading to the substantial tax bill covering the 2014/15 to 2018/19 tax years. This outcome has significant implications for other hedge funds and alternative asset managers structured as LLPs in the UK, as it clarifies the tax treatment of partner remuneration across the industry.
Industry bodies such as the Alternative Investment Management Association (AIMA) and the Managed Funds Association were granted permission to intervene, highlighting the broader impact of this case on the UK asset management sector. The ruling sets a precedent for how senior traders within similar corporate structures will be taxed going forward, potentially affecting entities like CQS and Cheyne Capital Management, which have also faced scrutiny over their tax practices.
