UK ‘no longer a serious place’ says Hedge fund boss after losing £200m tax battle
Hedge fund Bluecrest Capital Management, founded by the UK’s wealthiest financier, said the UK is no longer “a serious contender” as a place to do business after it lost a £200m battle with the tax man, in a ruling that could now leave the wider hedge fund and professional services industries facing a hefty bill.
The UK’s Supreme Court ruled against the hedge fund run by billionaire Michael Platt, unanimously rejecting its argument that its partners were technically self employed and therefore not subject to the same income tax and national insurance as normal employees.
The court ruled that partners in a Limited Liability Partnership (LLPs) must be taxed as employees rather than as self-employed profit-sharers. Bluecrest now faces a near £200m tax bill as a result of the ruling.
A Bluecrest spokesperson said HMRC’s guidance on salaried members’ rules “was, and remains, wrong.”
“The cost of those errors has been fully pushed onto the taxpayer,” they said.
“Businesses operating in the UK need to be able to rely on HMRC’s guidance to organise their tax affairs with certainty,” they added. “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.”
The legal battle centres on so-called salaried member rules which determine whether LLPs, which include the majority of law and professional services firms, including the Big Four, are self-employed or ‘disguised employees’, for tax reasons. The case could now wider ramifications for the hedge fund and professional services industries and open the door to a major tax bill from HMRC.
HMRC initiated the dispute after auditing Bluecrest for the tax years 2014/15 to 2018/19 and determining that almost all Bluecrest members, except a few executive committee members, were ‘salaried members’. As a result, it sought to collect income tax and national insurance contributions.
Platt was was named the 12th wealthiest person in the UK by the Sunday Times Rich List last year, and Britain’s wealthiest hedge fund manager with an estimated net worth of nearly £13bn.
Bluecrest Capital Management reported a surge in revenue to £130.8m for the year ending 31 March 2025, a 149 per cent increase from £52.6m the previous year.
‘Significant implications’ for LLPs
Stephen Kenny, partner and head of the private client practice at PKF Littlejohn told CityAM the judgment “will have significant implications for LLPs”.
“As a result, many firms may need to revisit their LLP agreements and remuneration structures, with capital contributions likely to become an increasingly important factor in determining whether the salaried member rules apply,” he added.
Alexandra Ueno-Park, partner in the tax practice group at Haynes Boone, told CityAM the decision “could have far-reaching consequences for professional partnerships across the UK.”
“It is also likely to encourage HMRC to scrutinise similar LLP-based models used by other professional services businesses, including private capital and investment fund managers,” Ueno-Park said.
Ueno-Park added that “for many investment funds, for example, the financial implications could be significant”, and that classing certain partners as employees will trigger “additional employment costs, including employer National Insurance contributions at 13.8%, fundamentally altering the economics of operating a fund in the UK.”
The Big Four giants KPMG, EY, Deloitte and PwC are among the firms that could be affected by the judgment’s outcome.
KPMG tax partner Katie Illman said in a post on the firm’s website in May if the court rules in favour of HMRC it “will be significant for professional partnerships operating through LLPs” and have “potential implications, including significant back taxes and for governance, capital and reward structures across professional partnerships.”
Back and forth in court
The case first went to a First-Tier Tribunal in March 2021, which found that bonuses based on individual members’ performance constituted “disguised salary.”
However, the tribunal also ruled partially in favour of Bluecrest, finding that its portfolio managers had “significant influence” over the firm because of the financial impact of their roles, even if they were not in senior management roles.
Both parties then appealed to the Upper Tribunal, which held a hearing in June 2023, and the tribunal largely upheld the FTT’s decision, however in January In January, the highest court heard BlueCrest’s appeal, and rejected their arguments that the members had substantial financial influence.