BlueCrest Capital Management LP and others v HMRC

In BlueCrest Capital Management LP and others v HMRC [2023] EWCA Civ 1481 (15 December 2023) the Court of Appeal (CA) held that profits allocated to a corporate partner under a partner incentivisation plan (PIP) could not be treated as income of the individual partners but that the payments eventually made to those partners were subject to income tax as miscellaneous income.

BlueCrest Capital Management LP (BCM LP) was a limited partnership operating as an investment manager. It established a PIP under which a corporate partner was introduced and was awarded a portion of the LP's profits on a discretionary basis. It then reinvested those profits into the LP as a capital contribution (so-called ‘special capital’) and shares in that capital were awarded to other partners according to their performance in the business. It was accepted that the PIP had both a commercial purposes and a perceived tax advantage. The...

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