Hedge Funds
UK hedge funds rethink partner structures after BlueCrest loses salaried-member case
Firms organised as LLPs are reviewing partners' tax status and talking to HMRC following the Supreme Court's July ruling against BlueCrest.
HedgeWeekly Hedge Fund Desk ·
Hedge funds and other UK firms set up as limited liability partnerships are reassessing how their partners are classified for tax, and some are opening talks with HM Revenue & Customs, Hedgeweek reported on October 20, citing the Financial Times. The review follows BlueCrest Capital Management's defeat at the UK Supreme Court.
The court unanimously dismissed BlueCrest's appeal on July 1, 2026, in a dispute over the 2014 salaried-member rules. HMRC had pursued PAYE determinations of about £142 million and Class 1 National Insurance contributions of roughly £55.3 million. The judges held that portfolio managers paid by reference to the profits they personally generated met the 'disguised salary' test, and that only formal, legally enforceable rights, not informal seniority or book size, can show significant influence over the partnership. Individual positions were sent back to the First-tier Tribunal.
According to Hedgeweek, advisers are reporting a sharp increase in HMRC inquiries, and firms are weighing changes to partners' voting rights, management roles and capital commitments. Some are seeking settlements over historic liabilities instead of litigating, and firms found to have misclassified members could face up to six years of backdated National Insurance contributions.
Why it matters: The LLP has long been the default structure for London-based managers, and partner status shapes both compensation economics and promotion paths. Allocators doing operational due diligence on UK managers may want to ask whether a firm has exposure to historic employer tax claims and how its partnership terms are being revised.