LLP salaried member rules after BlueCrest Supreme Court decision (2026 guide for LLPs)

Supreme Court judgment (July 2026): key changes for LLP salaried member rules

The Supreme Court has issued its judgment in HMRC v BlueCrest Capital Management (UK) LLP, providing important guidance on the LLP salaried member rules. The Court unanimously dismissed BlueCrest’s appeal and upheld the Court of Appeal’s approach to both Condition A and Condition B.

Although the case concerned an investment management LLP, the Supreme Court’s analysis has implications for LLPs more broadly, including professional services firms and other businesses operating through LLP structures.

What are the LLP salaried member rules? Conditions A, B and C explained

The salaried member rules are designed to prevent tax avoidance by targeting LLP members whose position is closer to that of an employee than a traditional partner (ie disguised employees).

A member of an LLP is treated as an employee for income tax and National Insurance contribution (NIC) purposes if all three of the following conditions are met:

1. Condition A: remuneration

It’s reasonable to expect that at least 80% of the total amount payable to the member will be ‘disguised salary’. Broadly, this means remuneration that is fixed, variable without reference to the LLP’s overall profits or losses, or not in practice affected by those profits or losses.

2. Condition B: influence

The mutual rights and duties of the members and the LLP do not give the individual ‘significant influence’ over the affairs of the LLP.

3. Condition C: capital

The member’s capital contribution is less than 25% of their disguised salary.

A member should then be treated as self-employed if they don’t meet one or more of these conditions.

Condition B explained: what counts as ‘significant influence’ after BlueCrest

The Supreme Court confirmed that Condition B is concerned with influence arising from the member’s legally enforceable rights and duties rather than their commercial importance within the business.

Mutual rights and duties: the starting point

The Court held that the relevant influence must derive from the LLP’s constitutional framework, including the LLP agreement, applicable legislation and other legally enforceable rights and obligations between the LLP and its members.

Importantly, the Court recognised that significant influence is not limited to powers expressly written into an LLP agreement. Formal powers delegated through governance structures, committee memberships or management roles may also be relevant where they can be traced back to the LLP’s constitutional arrangements.

Conversely, influence based on a member’s strong performance, high financial contribution to the profits of the LLP, personal qualities or client relationships does not count for Condition B purposes if it cannot be traced to legally enforceable rights and responsibilities.

Influence does not mean control

The Supreme Court confirmed that a member does not need to control the LLP or be able to direct or dictate in order to have significant influence. The relevant test is whether the member has the ability to influence decisions affecting the LLP’s affairs.

The Court agreed with the Court of Appeal that ‘significant influence’ required “a degree of influence … which has practical and commercial substance in the conduct of those affairs in the real world.”

What are the ‘affairs of the LLP’?

Another important part of the judgment is the Court’s explanation that the ‘affairs of the LLP’ means the affairs of the LLP viewed as a whole.

The Court accepted that the affairs of an LLP are broader than its business activities but made clear that influence over only one part of the business without broader governance rights is unlikely to be sufficient.

Instead, Condition B is generally concerned with members who have a voice in the management and governance of the LLP overall.

In many LLPs, this is likely to involve participation in strategic or high-level management decisions. Rights to influence the overall direction, governance or management of the LLP are more likely to be relevant than responsibility for a particular service line or operational function.

Examples

Likely not significant influence

• Heads a department
• Generates substantial profits
• Manages a large client portfolio
• No meaningful governance rights

More likely significant influence

• Sits on management board
• Votes on LLP strategy and budgets
• Participates in governance decisions

Why strategic responsibility matters more than operational roles under Condition B

The Supreme Court indicated that significant influence is more likely to arise from participation in management or governance decisions than from day-to-day operational activity.

This was central to the Court’s rejection of BlueCrest’s arguments. The investment managers were responsible for substantial trading decisions and managing significant investment portfolios. However, the Court held that responsibility for important operational decisions and profitability does not of itself amount to significant influence over the affairs of the LLP.

The Court also rejected the idea that influence can be demonstrated simply because an individual is highly respected or commercially successful.

How to apply Condition B: step-by-step framework for LLPs

The Supreme Court effectively set out a step-by-step framework for applying Condition B. LLPs should consider:

1. What the LLP actually does in carrying on its business.
2. What legally enforceable rights and duties the member has as a member of the LLP.
3. Whether those rights and duties give the member a meaningful voice in decisions affecting the LLP’s affairs as a whole.
4. Whether that influence is sufficiently significant in practical and commercial terms.

This is likely to focus attention on LLP agreements, governance structures, management boards, executive committees and delegated authority arrangements.

Why the First-tier Tribunal decision was overturned in BlueCrest

The Supreme Court agreed with the Court of Appeal that the First-tier Tribunal had applied the wrong legal test.

The Tribunal focused heavily on members’ practical influence, commercial importance and financial contribution to the business. The Supreme Court held that this gave too much weight to matters such as personal qualities, experience, profitability and operational responsibilities, rather than the legally enforceable rights and duties required by Condition B.

The Court also criticised the Tribunal’s reliance on operational influence and profitability. A member’s ability to generate profits, win work or perform an important commercial role is not the same as having significant influence over the affairs of the LLP.  The Supreme Court rejected the Tribunal’s original approach and confirmed that influence must be derived from legally enforceable rights and responsibilities, which is a significant narrowing of Condition B.

Condition A after BlueCrest

The Supreme Court also upheld the lower courts’ interpretation of Condition A.

BlueCrest argued that its members’ remuneration was linked to the LLP’s overall profits because the LLP’s total profits acted as a cap on discretionary allocations. The Court rejected this argument and concluded that the payments were essentially determined by the performance of individual portfolios rather than the LLP’s overall profits.

The Court confirmed that Condition A is intended to distinguish remuneration that is typical of a partner from remuneration that is typical of an employee.

A relatively remote or indirect connection to overall LLP profitability is therefore unlikely, by itself, to prevent amounts from being treated as disguised salary.

Condition C and HMRC’s guidance (2025): capital contributions and TAAR explained

Although Condition C was not in dispute before the Supreme Court, HMRC updated its guidance in Spring 2025 following considerable uncertainty concerning the application of the targeted anti-avoidance rule (TAAR).

The TAAR can apply where arrangements have a main purpose, or one of their main purposes, of securing that the salaried member rules do not apply. Where the TAAR applies, the relevant arrangements are effectively ignored when determining whether the salaried member rules apply.

HMRC nevertheless accepts that the legislation is intended to distinguish genuine partners from individuals who are, in substance, employees, and that genuine and long-term changes to a member’s position within an LLP are not contrary to that policy objective.

HMRC now accepts that genuine and enduring capital contributions which give rise to real economic risk will not trigger the TAAR simply because they result in a member failing Condition C. This may apply both to initial capital contributions and to subsequent top-up arrangements.

The guidance states that all the facts and circumstances should be considered, including whether:

• The contribution is intended to be enduring
• The member is genuinely at risk of losing the contribution if the LLP suffers losses or becomes insolvent
• The capital is available for the LLP’s commercial use
• The capital is not effectively ringfenced for the benefit of the contributing member

HMRC also accepts that capital contributions funded through commercial borrowing can still satisfy these requirements where the member bears genuine repayment risk.

What the BlueCrest decision means for LLPs in 2026: key tax and structuring implications

The Supreme Court’s judgment provides significantly more certainty than previously existed around the interpretation of Conditions A and B.

For many LLPs, the focus is now likely to shift away from whether a member is commercially important and towards whether their legal rights and responsibilities genuinely give them influence over the management and governance of the LLP as a whole.

LLPs that have historically relied on members failing Condition B should consider reviewing their governance arrangements and member status analyses to ensure they remain supportable in light of the Supreme Court’s narrower interpretation.

While the legal test is now considerably clearer, applying it to particular LLP governance arrangements may still require detailed analysis. The BlueCrest case itself will return to the First-tier Tribunal for reconsideration of the facts using the correct legal test.

How Saffery can help with LLP salaried member rules

We can help you understand what the Supreme Court’s decision means for your LLP and assess whether your members are likely to fall within the salaried member rules. This could include:

• Review LLP agreements
• Review delegated governance powers
• Reassess members currently treated as failing Condition B
• Revisit remuneration arrangements under Condition A
• Review capital contribution arrangements under Condition C

We can also review LLP agreements, governance arrangements and capital structures, and advise on the practical implications of the latest developments.

If you’d like to discuss the impact of the BlueCrest decision on your LLP, please speak to your usual Saffery contact or contact us using this form.

Useful resources:

• HMRC v BlueCrest Capital Management (UK) LLP
• PM251000 | Salaried Member Rules – Gov.uk