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HMRC sending tax letters to Brits after Supreme Court ruling
HMRC is contacting limited liability partnerships (LLPs) to check whether some members treated as self-employed should instead be classed as employees for tax purposes. The reviews follow a Supreme Court ruling that set out when payments to LLP members count as salary rather than a share of business profits.
In HMRC v BlueCrest Capital Management (UK) LLP, decided on 1 July, the court found that traders’ pay was based on their individual results, with the firm’s overall profits acting only as a cap. The Government says LLPs should assess whether members’ pay depends on overall profits, have genuine rights to participate in running the firm and have contributed enough of their own funds. Tax specialists advise reviewing agreements and pay arrangements, particularly if HMRC has already opened a compliance check.
In short
- HMRC is reviewing LLP members’ tax status.
- The BlueCrest ruling distinguished salary from profit sharing.
- LLPs should review members’ pay, rights and contributions.
Steelman: both sides, in good faith
The strongest fair case each way — we don't pick a winner.
The case for
HMRC can argue that the ruling clarifies when LLP members are, in substance, paid like employees rather than sharing in the firm’s profits. Checking arrangements helps apply tax rules consistently and ensures people in comparable working positions are treated fairly.
The case against
LLPs can argue that members may be genuine business partners even when their pay reflects individual performance, and that applying employment tax rules too broadly could overlook the variety of partnership arrangements. They may also be concerned that uncertainty about the ruling’s criteria could lead to costly reviews and unexpected tax bills.
Explained simply
A limited liability partnership, or LLP, is a business structure whose members share responsibility for running the firm while benefiting from limited liability. Members are often treated as self-employed for tax, but the label alone does not settle their status: how they are paid and their role in the business can also matter.
The Supreme Court considered this in a dispute involving BlueCrest Capital Management and HMRC, the UK tax authority. The case concerned whether payments to LLP members were shares of the firm’s profits or effectively salaries, a distinction that can affect how tax and National Insurance are handled.