Key facts
- The UK's limited liability partnership (LLP) model is facing increased scrutiny from HMRC.
- A Supreme Court ruling this week found that delayed bonus payouts from HFFX LLP are taxable income upon receipt.
- Hedge fund BlueCrest Capital Management has a pending Supreme Court case concerning whether its members are self-employed or disguised employees.
- The tax at stake for BlueCrest if it loses its case is nearly £200 million.
- The LLP structure allows members to invest capital and take risks without paying corporate tax on profits.
The UK's limited liability partnership (LLP) model, a structure used by professional services firms for 25 years, is facing significant tax scrutiny from Her Majesty's Revenue and Customs (HMRC).
Despite avoiding direct taxation in the recent Budget following industry lobbying, LLPs are now the subject of two complex tax cases before the Supreme Court. One case, involving trading firm HFFX LLP, owned by billionaire Alex Gerko, recently saw the Supreme Court rule that delayed bonus payouts are taxable income when received by the team. This decision, while not allowing immediate taxation as HMRC initially sought, was considered a success for the tax authority.
The second case involves hedge fund BlueCrest Capital Management, founded by Michael Platt, and centers on whether its members are genuinely self-employed or 'disguised employees' for tax purposes. The amount of tax at stake for BlueCrest is nearly £200 million. Experts suggest that if the BlueCrest ruling aligns with the HFFX decision, HMRC would have achieved a comprehensive victory.
Commentators describe the situation as a "coordinated assault" on the LLP model, with concerns that this is a revenue grab targeting firms that are crucial to the UK's global financial and legal standing. The complexity of employment tax codes and the long-standing nature of some of these arrangements are also highlighted as contributing factors to the ongoing scrutiny.