BlueCrest Capital – UK Supreme Court confirms that a salaried partner can be a partner unless deemed to be an employee

The UK salaried members legislation provided that a member of an LLP was to be treated as an employee of the LLP for income tax and national insurance contribution purposes if any one of the following three conditions was satisfied:

• Condition A: The member's remuneration from the LLP was fixed, variable but without reference to the profits or losses of the partnership, or not in practice affected by the overall amount of those profits or losses.
• Condition B: The member did not have significant influence over the affairs of the LLP .
• Condition C: Regarding capital contributions to the LLP (which was not at issue in this case.)

Lord Richards and Lady Simler held that the investment manager members of an investment management services LLP, who were not members of the executive committee, satisfied Condition A because most of their remuneration was disguised salary, i.e., they were paid by reference “to the profits generated by themselves or by their team” rather than “the profits of the firm as a whole” ; and also did not satisfy Condition B given inter alia that this Condition “looks to whether a member has influence by virtue of rights to participate in important decisions concerning the partnership and its business viewed as a whole”, as contrasted to “day to day management or operational management of only a part of the business”.

Before so finding, they discussed the common law distinction between being a partner and an employee and noted that, in Stekel v Ellice [1973] 1 WLR 191, a salaried partner who did not provide capital was nonetheless found to be a partner, given that he had the right to participate in important decisions about the firm's affairs.

They went on to state:

It is readily apparent that the test set by the legislation (in Conditions A, B and C) broadly encapsulates three elements of the common law test for traditional partnership status. …

… [H]aving regard to the purpose of Condition B and the common law test from which it derives, we consider that the requirement that the member has influence over the affairs of the LLP does suggest having "a voice in the management of the affairs of the LLP" … . It follows that the influence is likely to lie in rights to participate in high level or strategic decision making about the partnership's affairs or at any rate, an ability to influence such decisions. …

It is clear that Condition A is, in general terms, designed to reflect one of the principal characteristics of a traditional partnership, that the profits and losses of the partnership are shared between the partners.

Neal Armstrong. Summary of Commissioners for His Majesty's Revenue and Customs v BlueCrest Capital Management (UK) LLP [2026] UKSC 18 under s. 96.