BlueCrest: Root & Branch

• Published date: 10 January 2024
• Law Firm: Ropes & Gray LLP
• Author: Mr Andrew Howard

Shortly before Christmas the Court of Appeal handed down its judgment in the case of HMRC v BlueCrest Capital Management LP & Others [2023] EWCA Civ 1481. This latest instalment of the tax litigation relating to the BlueCrest hedge fund relates to deferred remuneration arrangements for BlueCrest partners.

The BlueCrest partnership allocated profits to a corporate member, which contributed its post-tax allocation back to the partnership as "special capital". That amount was subsequently paid over to individual partners by the corporate member exercising its discretion to re-allocate the "special capital".

Those partners took the position that such amounts were not taxable because they were the same profits that had already been taxed in the hands of the corporate member (at the lower rate which applies to companies). This type of planning was subsequently limited by the introduction of the "mixed member" rules in 2014.

The Court of Appeal affirmed the finding of the Upper Tier Tribunal that the amounts...