The Commissioners For HMRC v Bluecrest Capital Management LP & Ors

The Commissioners For HMRC v Bluecrest Capital Management LP & Ors

The PIP arrangements did not give individual partners a right to share in partnership profits under section 850 ITTOIA 2005; the profit allocations to the corporate partner were genuine and must be respected. However, the final PIP awards to individual partners constituted income analogous to deferred remuneration, with the source being the corporate partner's decision to make the award, and are taxable as miscellaneous income under section 687 ITTOIA 2005.

Parties
Appellant/respondent: THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMS (HMRC); Respondent/appellant: BLUECREST CAPITAL MANAGEMENT LP; Respondent/appellant: BLUECREST CAPITAL MANAGEMENT LLP; Respondent/appellant: BLUECREST CAPITAL MANAGEMENT (UK) LLP; Appellant: ANDREW DODD; Appellant: LEDA BRAGA; Appellant: SIMON DANNATT; Appellant: MICHAEL EDWARD PLATT; Appellant: JONATHAN WARD
Jurisdiction
England and Wales
Judgment Date
11 October 2024
Procedural Posture
Civil Appeal (tax) / Second Appeal to Court of Appeal From Upper Tribunal
Outcome
HMRC's appeal dismissed; Partnerships' appeal dismissed.
Legal Topics
Partnership Profit Allocation, Miscellaneous Income, Tax Avoidance, Deferred Remuneration, Corporate Partners, Income Characterisation
Tax Law Partnership Law Partnership Profit Allocation Miscellaneous Income Tax Avoidance Deferred Remuneration Corporate Partners Income Characterisation

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Parties

THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMS (HMRC)

Appellant/respondent

BLUECREST CAPITAL MANAGEMENT LP

Respondent/appellant

BLUECREST CAPITAL MANAGEMENT LLP

Respondent/appellant

BLUECREST CAPITAL MANAGEMENT (UK) LLP

Respondent/appellant

ANDREW DODD

Appellant

LEDA BRAGA

Appellant

SIMON DANNATT

Appellant

MICHAEL EDWARD PLATT

Appellant

JONATHAN WARD

Appellant

Procedural Posture

Civil Appeal (tax) / Second Appeal to Court of Appeal From Upper Tribunal

Legal Issues

  1. 1 Whether profit shares allocated to a corporate partner under a Partner Incentivisation Plan (PIP) are properly chargeable to income tax as the profits of individual partners under section 850 ITTOIA 2005.
  2. 2 Whether final PIP awards to individual partners are taxable as miscellaneous income under section 687 ITTOIA 2005.
  3. 3 Whether the PIP arrangements constitute a diversion of income analogous to the principles in Hadlee and Rangers.

Ratio Decidendi

The PIP arrangements did not give individual partners a right to share in partnership profits under section 850 ITTOIA 2005; the profit allocations to the corporate partner were genuine and must be respected. However, the final PIP awards to individual partners constituted income analogous to deferred remuneration, with the source being the corporate partner's decision to make the award, and are taxable as miscellaneous income under section 687 ITTOIA 2005.

Court Disposition

HMRC's appeal dismissed; Partnerships' appeal dismissed.

Orders

  • HMRC's appeal on all grounds is dismissed.
  • The partnerships' appeal is dismissed; the final PIP awards are taxable as miscellaneous income under section 687 ITTOIA 2005.