Author: Alison Hayden
The Supreme Court has ruled that most of the LLP members of BlueCrest LLP should be treated as employees, rather than self employed partners. This has brought the legal rights and duties of LLP members into the spotlight once again.
The court has placed a higher importance on the statutory definition of an LLP member as detailed in the LLP agreement.
It has also brought one of the defining questions of modern professional services firms sharply into focus: what does it really mean to be a partner?
Do the LLP members have significant influence over the affairs of the LLP in a practical and commercial sense ‘in the real world’? In my opinion the crux of this question is: Are they business owners? Are they involved in the wider strategy and managerial roles of the business in which they are sharing in the profits or losses? And can this be documented within the governance structure of the LLP?
But how did we get here?
The Evolution of the LLP
To understand why this matters, it is worth remembering why LLPs became so popular in the first place, following their introduction in the Limited Liability Partnership Act 2000.
One of the main benefits centres on the corporate separation of liability, which allows individual partners to invest in businesses without the risk of being personally liable for the business debts.
Alongside these commercial benefits came favourable tax treatment, with members generally taxed on a self-employed basis. Prior to the salaried member rules being introduced in 2014, this term had a looser definition and in some cases was open to abuse.
An example of this abuse was the case of Christopher Lunn & Co. A high percentage of all staff across the firm were in fact LLP members, regardless of their job title. This was to benefit from the vast employer’s national insurance savings. Other irregularities and issues within the firm led to an HMRC enquiry. The result of this enquiry was a prison sentence for Mr Lunn and HMRC successfully recovering c. £20 million under an amnesty scheme.
So, we see the history of the LLP and perhaps an understanding to the introduction of the 2014 salaried member rules; in that an LLP member is treated as a salaried member if all three of the following conditions are met:
- the member receives “disguised salary” (Condition A);
- the member does not have significant influence over the affairs of the LLP (Condition B); and
- the member’s capital contribution is less than 25% of their disguised salary (Condition C).
Condition A and C are fairly measurable, however this left ongoing challenges around Condition B ‘significant influence’ as this criteria is hardest to quantify.
The BlueCrest judgment represents the latest chapter in that story.
If relying on Condition B, LLP’s should be placing higher importance on the statutory definition of an LLP member per the partnership agreement and how the LLP operates in practice.
Perhaps an even more important question:
Are all partners actually partners?
Many professional services firms have evolved towards large and increasingly complex partner structures. In some firms, there may be considerable differences between equity partners who drive strategy and governance, and fixed-share or salaried partners whose primary focus is client delivery or operational responsibilities.
The Supreme Court’s judgment suggests that titles, status and remuneration alone may no longer be enough to support self-employed treatment. Firms must be able to demonstrate genuine ownership characteristics through governance rights, decision-making authority and participation in the affairs of the LLP as a whole.
And where do we go from here? What is the future of the LLP model.
Prior to the November 2025 Budget there was a lot of noise around expected increases in National Insurance rates for self employed partners in LLP’s, to equalise this to 15%. The Chancellor was keen for members of LLP’s to ‘shoulder the burden’ and equalise tax treatment. However, we must not forget that LLP members do not benefit from employment rights such as unfair dismissal and statutory rights relating to parental leave.
What Should Firms Be Doing Now?
The immediate priority for LLPs is clear. Firms should review whether members currently relying on Condition B can genuinely demonstrate significant influence under the narrower interpretation now endorsed by the Supreme Court.
The BlueCrest case may have started as a tax dispute, but its legacy could be far broader. It has reignited the debate around what defines a partner in the modern professional services environment.
The real question for firms is no longer whether their members are influential. It is whether they can demonstrate that influence as owners of the business, not simply as successful participants within it.
The information in this article was correct at the date it was first published.
However it is of a generic nature and cannot constitute advice. Specific advice should be sought before any action taken.
If you would like to discuss how this applies to you, we would be delighted to talk to you. Please make contact with the author on the details shown below.
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