Rising employment costs and widening employment law risk may make LLP structuring look attractive. But the Supreme Court’s recent decisions in the cases of BlueCrest and HFFX underline that LLP status is not a simple workaround: the structure, economics and governance must support genuine partner treatment.
Published: 7 July 2026
Authors: Laura Gould
Being an employer is becoming more expensive - and riskier. From April 2025, employer NICs increased from 13.8% to 15%, and the secondary threshold fell from £9,100 to £5,000, increasing the payroll cost of employing staff. At the same time, employment law reform is significantly increasing the potential cost and legal risk of terminating senior employees (in particular): from 1 January 2027, ordinary unfair dismissal protection is due to apply after six months’ service, rather than two years, and the statutory cap on unfair dismissal compensatory awards will be removed, potentially bringing high-value equity incentives and pension entitlements into the value of unfair dismissal claims.
Against that background, some businesses may ask whether senior individuals could be engaged as members of an LLP rather than as employees. LLP members are generally taxed as self-employed partners, not employees. The LLP does not pay employer NICs on profit allocations to genuine self-employed members, and those members do not automatically benefit from ordinary unfair dismissal protection.
But recent case law highlights that LLP status is not a simple solution to minimise costs and risk. The recent Supreme Court decisions in BlueCrest Capital Management (UK) LLP v HMRC [2026] (“BlueCrest”) and HMRC v HFFX LLP; Atkins & Ors v HMRC [2026] UKSC 17 (“HFFX”) are timely reminders that LLP profit-sharing and member remuneration arrangements are under close scrutiny. LLP “member” status is not simply a label that can be applied to mitigate the costs and obligations of employment. The legal and commercial substance matters.
BlueCrest: significant influence must be legally grounded
BlueCrest is a UK LLP providing investment management and support services. The focus of the long-running case concerned whether certain senior members should be treated as employees under the salaried members rules.
The Supreme Court dismissed BlueCrest’s appeal and, broadly, upheld the Court of Appeal’s approach, confirming a narrow interpretation of the “significant influence” condition (one of the three conditions that must be met for the member to be treated as an employee for tax purposes). The case will return to the First-tier Tribunal for the rules to be reapplied in light of the Supreme Court’s guidance.
The Court confirmed that “significant influence” must derive from the individual’s legally enforceable rights and duties as a member of the LLP and contained in the LLP agreement (or statutory framework). The requisite qualifying influence is likely to be managerial or strategic influence in relation to the affairs of the LLP itself. Crucially, the court held that managing a core part of the business does not constitute influence over the “affairs of the LLP taken as a whole”.
For firms that rely on members having “significant influence” in order to achieve or maintain self-employed tax status, BlueCrest requires a governance review. It is no longer enough to point to an individual’s commercial importance or day-to-day autonomy. The question is what enforceable rights they actually hold, whether those rights give influence over the LLP as a whole, and whether that influence has practical and commercial substance.
HFFX: another warning on LLP profit allocation
The Supreme Court’s decision in HFFX adds a further cautionary note. HFFX concerned structured profit-sharing arrangements within an LLP, under which amounts that would otherwise have been allocated to individual members were instead allocated to a corporate member, with awards later made to individuals through a “special capital” mechanism. The Supreme Court rejected HMRC’s profit allocation argument but held that the receipts were, nevertheless, taxable as miscellaneous income.
The Court’s approach, in HFFX and BlueCrest, reflects an increasing tendency by HMRC and the courts to scrutinise amounts received by self-employed LLP members or partners where those amounts arise outside straightforward allocations of trading profits.
Why this matters now
These decisions land at a time when the economics of employment are changing. Higher employer NICs, a lower NIC threshold and forthcoming employment law reforms are increasing the cost and legal risk of employing senior personnel.
These changes may encourage some businesses to ask whether they can and should be moving senior executives or investment professionals into an LLP structure. But these cases demonstrate that simply making someone an LLP member is not enough.
Businesses operating through or considering LLP arrangements for senior executives should treat BlueCrest and HFFX as governance and documentation warnings and use them as an opportunity to review their LLP arrangements.
If you would like to discuss this further, please contact Laura Gould at Laura.Gould@shoosmiths.com or Adam Lambert at Adam.Lambert@shoosmiths.com or your usual Shoosmiths contact.