Key Facts
- •Bluecrest Capital Management (UK) LLP (BlueCrest) is a UK LLP in the alternative investment industry.
- •HMRC determined BlueCrest liable for PAYE and Class 1 NICs for 2014/15 to 2018/19, arguing most members were disguised employees under the salaried members legislation.
- •The salaried members legislation (sections 863A-G ITTOIA 2005) contains Conditions A, B, and C; failure of any one means the rules don't apply.
- •The FTT allowed the appeal partly, finding all members met Condition A, but some met Condition B.
- •HMRC appealed that no members (except Original ExCo) met Condition B, while BlueCrest cross-appealed that no members met Condition A.
- •The case concerned the interpretation of "significant influence" (Condition B) and the link between remuneration and partnership profits/losses (Condition A).
Legal Principles
Findings of fact can be challenged on appeal only if there's an error of law; the only reasonable conclusion contradicts the determination; or the tribunal misunderstood the law.
Edwards v Bairstow [1956] AC 14
The nature of a partnership is inconsistent with the status of an employee; there's a lack of subordination.
Bates van Winkelhof v Clyde & Co. LLP [2012] EWCA Civ 1207
Applying the salaried members legislation requires considering the individual case and statutory wording; there's no single test.
Bates van Winkelhof v Clyde & Co. LLP [2014] UKSC 32
Condition B focuses on whether mutual rights and duties give a member significant influence; de facto influence is considered.
Sections 863A-G ITTOIA 2005
Condition A considers whether it's reasonable to expect at least 80% of remuneration to be disguised salary (fixed, variable without reference to profits/losses, or not affected by profits/losses).
Sections 863A-G ITTOIA 2005
Outcomes
Appeal dismissed.
The FTT correctly applied Condition B; portfolio managers with significant capital allocations exercised significant influence through various activities, including managerial clout. The FTT’s findings were supported by evidence and not irrational.
Cross-appeal dismissed.
The FTT correctly applied Condition A; the link between discretionary allocations and partnership profits/losses was insufficient to remove them from the definition of disguised salary. The evidence didn't show the remuneration was reasonably expected to be affected by the overall profits or losses.