HMRC focuses on LLPs following the BlueCrest judgment

Following the Supreme Court’s decision in HMRC v BlueCrest Capital Management (UK) LLP [2026] UKSC 18, HMRC has begun writing to limited liability partnerships (LLPs) as part of a 'compliance check' into the tax status of their members.

HMRC's focus is on whether members who are currently treated as self-employed should instead be treated as employees under the salaried members rules in section 863A-G ITTOIA 2005.

What are the salaried members rules?

The salaried members rules are designed to prevent LLP members who are, in substance, employees, from obtaining the tax treatment available to genuine partners.

An LLP member is treated as a salaried member — and therefore as an employee for tax and National Insurance purposes — where all three of the following conditions are met:

• Condition A – Disguised salary: At least 80% of the member’s expected remuneration is fixed, or does not vary by reference to the LLP’s overall profits or losses, or is not affected by the LLP's overall profits or losses.
• Condition B – Significant influence: The member does not have significant influence over the affairs of the LLP.
• Condition C – Capital contribution: The member’s capital contribution is less than 25% of their expected disguised salary.

If all three conditions are met, the member is treated as an employee. The LLP will generally need to operate PAYE and account for Class 1 employer National Insurance contributions on the relevant payments.

Importantly, a member only needs to fail one of the three conditions to remain outside the salaried members rules.

What did the Supreme Court decide in BlueCrest?

The BlueCrest case considered whether certain members of an investment management LLP were genuinely self-employed partners or employees of the LLP, under the salaried members rules.

The Supreme Court’s decision provides important guidance on two of the conditions.

Condition A – remuneration

The Court confirmed that the existence of a profit-sharing arrangement does not, by itself, establish that remuneration genuinely varies with the LLP’s overall profits. In particular, a cap on an individual member’s profit share may mean that their remuneration is effectively fixed or limited, even where it is technically expressed as a share of profits.

Condition B – significant influence

The Court took a relatively strict approach to the concept of “significant influence”.

The relevant influence must arise from formal, legally enforceable rights and duties derived from an identifiable contractual, statutory or other legal source, rather than simply from a member’s seniority, commercial importance, revenue generation or day-to-day operational responsibilities.

Further, having "significant" influence does not require that a member have the ability or power to control the LLP’s affairs or determine a particular course of action. Rather, it is sufficient if the member has the ability to influence the affairs of the LLP in the sense of having the right to participate in important decisions capable of affecting the affairs of the partnership or the way the affairs of the partnership are conducted, whether through meaningful voting or other rights.

As a result, having substantial responsibility within an LLP does not necessarily mean that a member has significant influence for the purposes of the salaried members rules.

Why does this matter now?

HMRC’s current compliance activity means that LLPs should expect greater scrutiny of the basis on which their members are treated as self-employed.

The BlueCrest judgment raises particular questions for LLPs where:

• members receive largely fixed or capped remuneration;
• profit allocations do not materially fluctuate with the LLP’s overall profitability;
• members have significant operational responsibilities but limited formal rights under the LLP agreement;
• members’ capital contributions are relatively small compared with their expected remuneration; or
• the LLP relies on informal governance arrangements rather than clearly documented rights and responsibilities.

The decision is therefore likely to have implications well beyond the financial services sector. Professional services firms and other LLPs should consider whether their existing arrangements continue to support self-employed partner treatment.

What should LLPs do?

LLPs should consider undertaking a review of their members’ positions against all three salaried member conditions, with particular attention to:

1. Remuneration arrangements – how members’ expected remuneration is calculated and whether it genuinely varies with the LLP’s overall profits or losses.
2. Governance and LLP agreements – whether members have formal, legally enforceable rights that amount to significant influence over the affairs of the LLP.
3. Capital contributions – whether members have sufficient capital at risk relative to their expected remuneration.
4. HMRC correspondence – whether the LLP has received, or is likely to receive, an HMRC compliance check and whether the requested information can be supported by appropriate documentation.

Key takeaway

The BlueCrest judgment sets a demanding standard for LLPs seeking to establish that their members are genuinely self-employed.

With HMRC now actively reviewing LLPs, firms should not assume that historical treatment will continue to be accepted. The terms of the LLP agreement, the actual remuneration arrangements and the formal rights of members should all be reviewed carefully.

Where an LLP is already subject to an HMRC compliance check, specialist advice should be taken before responding, particularly where the status of a significant number of members could be affected.