BlueCrest Capital Loses £200 Million HMRC Tax Dispute in UK Supreme Court
Supreme Court Ruling and Its Impact on BlueCrest Capital
By Kirstin Ridley and Nell Mackenzie
LONDON, July 1 (Reuters) - Billionaire Michael Platt's BlueCrest Capital Management on Wednesday lost a near £200 million ($265 million), drawn-out battle against Britain's tax authority, ending one of the most significant tax disputes in Britain's asset management industry.
The UK Supreme Court unanimously dismissed BlueCrest's appeal against a lower court ruling that decided relevant members should be taxed as employees rather than partners, who are often treated as self-employed for tax purposes.
Following the ruling, BlueCrest Capital Management, an investment manager formed as a limited liability partnership, said Britain was "no longer a serious contender as a jurisdiction in which to do business".
Reactions to the Supreme Court Decision
"Today's judgment confirms that HMRC published guidance on the salaried members rules was, and remains, wrong," a BlueCrest spokesperson said, adding that businesses needed to be able to rely on the agency to organise their tax affairs with certainty.
HM Revenue and Customs said it welcomed the court decision, adding that it would consider whether it needed to update its industry guidance in light of the judgment.
Distinction Between Partners and Employees
Key Legal Question in the Dispute
The case turned on how salaried members legislation should be interpreted and whether a member of a limited liability partnership should be treated as a partner or as an employee for the purposes of income tax and national insurance contributions.
HMRC's Position and Financial Demands
HMRC had decided that, between 2014 and 2019 inclusive, most of BlueCrest's members met the conditions for salaried members: they had fixed salaries, no role in the partnership's management and no exposure to its losses.
It demanded around £142 million for those five tax years and a further £55.3 million for national insurance contributions — mandatory payments to qualify for benefits and a state pension.
BlueCrest's Arguments and Supreme Court's Response
BlueCrest argued that its investment manager members' remuneration was tied to the LLP's profits and that, by placing multi-million-pound trades, they exercised significant influence over the LLP's affairs.
The Supreme Court conceded BlueCrest's members had significant responsibility, including over investment decisions, but said their role in the LLP's governance was minimal.
Industry Reactions and Broader Implications
Concerns from Industry Figures
"Michael Platt's frustration ... reflects concerns that many senior industry figures have expressed privately," said Bruno Schneller, managing partner at Zurich-based Erlen Capital Management, adding that the UK had exceptional talent, infrastructure and regulatory credibility.
Potential Impact on UK Competitiveness
"More broadly, however, increasing tax complexity, higher effective taxation of performance-based remuneration and an expansive application of anti-avoidance rules risk gradually eroding its competitive position," he said.
Exchange Rate Information
($1 = 0.7550 pounds)
(Reporting by Kirstin Ridley and Nell Mackenzie; Editing by Joe Bavier)