Michael Platt’s hedge fund loses Supreme Court battle over whether LLP members should be taxed as employees, fuelling City criticism of Britain’s tax regime and its impact on competitiveness

BlueCrest Capital Management says the UK is “no longer a serious contender” as a place to do business after the British-American investment management firm lost a Supreme Court tax appeal worth nearly £200m.

Yesterday’s ruling, in a dispute with HM Revenue & Customs over the tax treatment of members of BlueCrest’s UK limited liability partnership, is a significant defeat for billionnaire Michael Platt’s firm and a fresh flashpoint in City criticism of Britain’s competitiveness.

The court unanimously found against BlueCrest under the salaried members rules, which determine when LLP members should be taxed as employees rather than as partners. HMRC had issued PAYE determinations of about £142m and a national insurance decision of about £55.3m for the 2014 to 2019 tax years.

BlueCrest said it believed HMRC’s published guidance was wrong and that businesses operating in the UK needed to be able to rely on such guidance “to organise their tax affairs with certainty”.

“Without that certainty, and in an increasingly competitive global market, the UK is no longer a serious contender as a jurisdiction in which to do business,” the firm added.

The case centred on whether members of BlueCrest’s UK LLP were genuine partners for tax purposes or whether their remuneration amounted in substance to “disguised salary”.

The LLP, through which the firm operated in London from 2010, provided investment management and back-office services to other entities in the wider BlueCrest group.

The salaried members rules apply where three statutory conditions are met, covering the nature of a member’s pay, the degree of influence they exercise over the affairs of the LLP and the scale of their capital contribution.

BlueCrest, founded in 2000 by Platt and fellow trader William Reeves, accepted that the capital contribution condition was satisfied, leaving the Supreme Court to decide the pay and influence tests.

In its summary of the judgment, the court said: “BlueCrest’s individual members have significant responsibility within its business, including for multi-million-pound investment decisions. However, their role in the LLP’s governance is minimal.”

It added: “Responsibility for high value day-to-day investment decisions is therefore not in itself significant influence over the LLP’s affairs.”

HMRC said the ruling confirmed how the salaried members rules should be implemented. A spokesperson added: “As always, we will consider if any updates should be made to our guidance in light of this judgment.”

READ MORE: The legality of tax planning in an age of moral outrage. Tax planning provokes moral outrage far beyond its legal meaning. Harry Margulies examines how everyday, lawful decisions are recast as suspect behaviour, why legality remains the only workable standard in a free society, and how differing tax regimes create incentives that individuals and businesses are rational to follow.

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_{Main image: The UK Supreme Court which has dismissed BlueCrest Capital Management’s appeal in its tax dispute with HMRC over how some LLP members should be taxed. Credit: Kelsey Farish/Wikimedia Commons/CC BY 4.0}