Salaried member rules for LLPs: major clarification with BlueCrest Supreme Court decision – July 2026 update
On 1 July 2026, the Supreme Court handed down its judgment in HMRC v BlueCrest Capital Management (UK) LLP [2026] UKSC 18, dismissing BlueCrest’s appeal.
The decision is the most significant judicial authority to date on the LLP salaried member rules and has implications for all businesses who operate as an LLP, many of which are professional firms.
Background
The salaried member rules, introduced in 2014, are designed to ensure that LLP members who are effectively employees are taxed as employees rather than as self-employed partners.
An LLP member is treated as a salaried member if all three statutory conditions are met:
- the member receives “disguised salary” (Condition A);
- the member does not have significant influence over the affairs of the LLP (Condition B); and
- the member’s capital contribution is less than 25% of their disguised salary (Condition C).
The BlueCrest litigation primarily concerned the interpretation of Conditions A and B.
The Supreme Court’s decision
The Supreme Court upheld HMRC’s appeal and confirmed that the relevant BlueCrest members should be taxed as employees for income tax and National Insurance purposes.
Condition B – “significant influence”
A number of key points have been confirmed in the decision in relation to Condition B.
Firstly, although the First Tier Tribunal considered whether the members of the LLP exercised significant influence over the affairs of the LLP by considering their activities in the widest sense and not just by reference to the LLP Agreement, the Court of Appeal and Supreme Court have both ruled that this approach was incorrect.
In determining whether “significant influence over the affairs of the LLP” was held by a member, the influence held must be capable of being traced back to “an identifiable contractual, statutory or other legal source.”
Therefore, the duties of an LLP member holding a position on an executive board constituted in the members’ agreement could be considered for the purposes of Condition B. However, if a respected and experienced member regularly fed into managerial decisions but their ability to do so was not derived from the LLP agreement, this influence would be ignored.
Although BlueCrest’s portfolio managers exercised substantial discretion over investment decisions involving very large sums, this did not amount to significant influence over the affairs of the LLP because they lacked meaningful governance rights under the LLP’s constitutional arrangements.
Secondly, the Supreme Court decision analyses the meaning of each key aspect of Condition B and in particular what the words “significant”, “influence” and “affairs of the LLP” mean in this context.
Importantly, the requirement is that a member can “influence” but does not need to “control” the affairs of the LLP. However, for the influence over affairs to be “significant”, it must have “practical and commercial substance in the conduct of those affairs in the real world.”
The “affairs of the LLP” are interpreted as being mainly focused on “managerial” and “strategic” decision-making. Day-to-day decision making on a purely operational level may not qualify which appears at odds with HMRC guidance on this topic which lists “allocation of roles to key staff” and “management of key contracts relating to the firm generally (e.g. with the bank)” as examples of activities that would contribute towards “significant influence”.
Simply being a high-performing fee earner, investment manager or business generator will not normally be sufficient. Firms seeking to rely on Condition B will therefore need to demonstrate that members participate meaningfully in the strategic management of the LLP itself.
Condition A – “disguised salary”
The Court also confirmed that remuneration will not escape the disguised salary rules merely because it is described as a profit share.
The critical question is whether the member’s remuneration is genuinely dependent on the overall profits and losses of the LLP, rather than primarily reflecting the individual’s own performance or that of a particular team or business unit.
Practical implications for LLPs
The judgment is relevant to LLPs faced with navigating the salaried member rules.
Firms should consider whether:
- members currently relying on Condition B genuinely have legally enforceable governance rights over the LLP’s affairs;
- remuneration arrangements are sufficiently linked to the LLP’s overall profitability;
- LLP agreements accurately reflect how governance operates in practice; and
- existing analysis of salaried member rules remain appropriate in light of the Supreme Court’s guidance.
The decision may particularly affect firms relying on failing condition B whose members have extensive operational responsibilities but limited constitutional involvement in the management of the LLP.
HMRC guidance
It is expected that HMRC will update its published guidance to reflect the Supreme Court’s interpretation of the legislation. Professional firms should therefore expect increased scrutiny of LLP structures and governance arrangements from HMRC in future.
Next steps
We recommend that professional firms operating as LLPs undertake a fresh review of their position in light of this important judgment. Please get in touch if you would like to discuss how the decision may affect your own LLP.
