The Upper Tribunal has given judgment in the case of HMRC v BlueCrest Capital Management (UK) LLP [2023] UKUT 00232 (TCC).

Amanda Hardy KC and Oliver Marre represented the appellant taxpayer hedge fund, as they had before the First-tier Tribunal.

The Upper Tribunal rejected HMRC’s appeal against the First-tier Tribunal’s finding that the vast majority of the portfolio manager partners had significant influence over the affairs of BlueCrest.

This is the first case on the “salaried members rules” relating to the treatment of partners in Limited Liability Partnerships and the first judicial analysis of the statutory conditions found in sections 863A-863G of ITTOIA 2005.  It is also the first judicial consideration of the term “significant influence” in the context of tax legislation.

The case will have wide-ranging implications for the taxation of the asset management industry and other limited liability partnerships, including solicitors’ firms and accountants.

The Tribunal agreed with BlueCrest in respect of the scope and construction of the term “significant influence” in statutory Condition B and, as a result, found that BlueCrest had successfully demonstrated that vast majority of the portfolio managers had significant influence over the affairs of the LLP.

The Upper Tribunal also rejected BlueCrest’s cross appeal on the application of statutory Condition A to the remuneration arrangements in place in the years under appeal.

The decision can be found by clicking here.