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Billionaire Michael Platt’s BlueCrest Capital has warned the UK is “no longer a serious contender” as a place to do business after losing a £200mn legal battle with tax authorities.
The Supreme Court on Wednesday unanimously dismissed an appeal by the investment firm, which had been battling HMRC’s attempts to tax its partners as employees since 2022.
The appeal centred on the interpretation of legislation on the taxation of salaried members and its application to some members of BlueCrest Capital Management, which was formed as a limited liability partnership in 2009.
The legislation determines whether a member of a limited liability partnership or LLP is to be treated as a partner or as an employee of the partnership for the purposes of income tax and national insurance contributions (NICs).
The salaried members’ rules were introduced in 2014 to prevent employees being disguised as self-employed partners to avoid paying higher taxes and NICs.
True partners share in the profits of the partnership, meaning partnerships are not liable for NICs on their pay. But the taxes are due if their members are actually employees of the partnership.
BlueCrest was a leading test case because it considered how the rules should apply in complex partnership structures.
The dispute involved around 80–100 members of the BlueCrest partnership between 2014 and 2019. HMRC concluded that, apart from four individuals, the members should be treated as employees. On that basis, HMRC has sought to recover approximately £200mn in income tax and national insurance contributions.
BlueCrest said in the wake of the ruling that HMRC’s published guidance “was, and remains, wrong. The cost of those errors has been fully pushed on to the taxpayer.”
The group, which was once one of the world’s largest hedge funds, said the decision threatened the UK’s status as a financial centre.
“Businesses operating in the UK need to be able to rely on HMRC’s 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,” it said.
However, the head of compliance at a large hedge fund said most firms in the industry were set up differently and it was “crazy” for BlueCrest to have opted for the structure it did.
