Employment status for tax purposes
BlueCrest loses appeal, Supreme Court gives guidance on how to determine whether a salaried member of an LLP is taxed as an employee or as a partner; members’ “significant influence” over the affairs of an LLP must be determined by reference to their enforceable mutual rights and duties.
The Supreme Court dismissed BlueCrest’s appeal, confirming that most of its members should properly be treated as employees for tax purposes under the salaried members legislation. The salaried members legislation was enacted to counter the perceived unfairness in the taxation of certain members of LLPs. It sets out three separate conditions (see below) each directed at capturing a different feature of “disguised employment” in an LLP. A member is to be treated as an employee for tax purposes if each of the three conditions is met; if any one of the conditions is not met, the member is treated as an employee.
The three conditions are: Condition A (earnings are effectively disguised salary), Condition B (member lacks “significant influence” over LLP) and Condition C (insufficient capital contribution)) set out under the Finance Act 2014 (enacted to avoid “disguised employment”) must be met. It was accepted that Condition C is met by BlueCrest’s members, so the appeal centred around whether HMRC could show that BlueCrest’s members satisfied Conditions A and B.
HMRC issued determinations for the 2014–2019 tax years on the basis that most members were disguised employees under the salaried members legislation, giving rise to substantial PAYE and NIC liabilities.
The dispute centred on whether those members’ remuneration arrangements and roles meant they should instead be treated as employees, particularly in relation to the “disguised salary” test (Condition A) and whether they exercised “significant influence” over the LLP’s affairs (Condition B).
Importantly, the Supreme Court dismissed BlueCrest’s appeal in relation to conditions A and B. The Court of Appeal’s legal approach to determining whether an LLP member has “significant influence” was upheld by the Supreme Court, along with the order to remit to the FTT to determine the issue of whether any particular members lacked such influence. It upheld the Court of Appeal that Condition B must derive from legally enforceable rights and duties within the LLP’s constitutional framework, and could not be based on informal or operational influence – the focus is whether the member has a managerial or strategic voice in decisions affecting the affairs of the LLP as a whole. Members of the Board and UK ExCo could be said to have that influence – ordinary members could not. In relation to Condition A it agreed that members’ remuneration constituted “disguised salary” under Condition A, as it was insufficiently linked to the LLP’s overall firm-wide profits. Portfolio managers and desk heads were remunerated by reference to the profits generated by themselves or their team, rather than the profits of the firm as a whole.
In short: Conditions A and C were satisfied; Condition B remained to be re-determined but on a strict legal basis that is likely to make it harder for LLP members to argue they fall outside the tax regime applicable to employees.
The case will now be remitted back to the FTT to consider whether, correctly interpreted, the BlueCrest members in this case had “significant influence”. If they did not, they will be employees for tax purposes. In the meantime, all LLPs should consider their position, both historically and going forward. The decision of the Supreme Court adopts a different approach to that set out in HMRC guidance, providing greater context on how the “significant influence” test should be applied, and affected businesses should consider whether to review their current LLP arrangements and what actions they may take as a result of this decision.
Implications:
Employment status: tax or employment
LLP members may be treated as employees for tax purposes without necessarily acquiring employment rights; Employment Tribunals can take a different view on status for the purposes of statutory protections. That said,: individuals denied self-employed tax status may be more likely to test their position in the Employment Tribunal, even if success is not guaranteed – so there is increased litigation risk as a result of this Supreme Court decision
Employment rights?
Some LLPs are exploring moving to an employment-based model. In addition to increased employer NIC costs, treating individuals as employees would create exposure to a wider “raft” of employment law protections, including unfair dismissal rights (for which there will be uncapped compensation from January 2027 as a result of the Employment Rights Act 2025), redundancy pay, and potential collective rights (including collective bargaining obligations).
Commercial flexibility: remuneration and business protection
From a commercial perspective, LLP structures also continue to offer greater flexibility in remuneration, allowing members to share directly in profits and losses and enabling firms to adjust cost bases more dynamically than under a fixed salary-plus-bonus employment model. There are also business protection considerations: restrictive covenants may be more difficult to enforce against employees than LLP members, who, as self-employed individuals, may be treated as having greater bargaining power. Ongoing policy developments—such as consultations on reform of non-compete clauses and the potential extension of protections to “workers”—add further uncertainty in this area (NB we are still awaiting a government response to its consultation on on reform of non-compete clauses which closed in February 2026.)
What should we be doing now?
In light of the Supreme Court’s emphasis on legally enforceable rights and duties, LLPs should review their governance arrangements carefully. Where it is important to preserve self-employed tax treatment, firms may need to strengthen and clearly evidence the formal rights, decision-making powers and delegated authorities of senior members so that any “significant influence” is demonstrably rooted in the LLP’s constitutional framework. A general assertion that partners can influence the business, without identifiable legal rights underpinning that influence, is unlikely to be sufficient to avoid being categorised as an employee for tax purposes following this decision. See our Tax Team’s insight for more information.
Tribunal procedure – interim relief
Presidents of Employment Tribunals issue new interim relief guidance.
On 22 June 2026, the Presidents of the Employment Tribunals issued new guidance on applications for interim relief. Interim relief remains an emergency remedy available only in limited types of unfair dismissal cases. The guidance notes that Tribunals are seeing increasing numbers of applications for interim relief, largely driven by lengthy AI-assisted applications. Applications have reportedly increased from around 20 per year, to 20 per month. The guidance will be welcomed by Respondents as it is intended to assist Claimants in deciding whether to seek interim relief. It makes clear that the legal test for relief to be granted is whether the Claimant has a “pretty good chance of success”, rather than ‘more likely than not’. It also comments that the use of AI is making submissions too long, complex and contains irrelevant material. This is timely guidance, which is likely to be a useful starting reference to direct Claimants to when faced with an interim relief application.
High Court finds non compete covenant unenforceable and refuses injunctive relief for alleged misuse of confidential information.
The High Court held that a six month post termination non compete covenant imposed by the Claimant on a former employee was unenforceable as an unlawful restraint of trade, being drafted far too widely and not limited to protecting legitimate business interests such as customer connections or confidential information. The covenant purported to restrict the Defendant from working for a competing business within a defined area but, on its proper construction, operated to prevent employment in any capacity with a competing entity and contained an ineffective carve out. The High Court rejected the Claimant’s arguments that the restriction was justified by access to confidential pricing information or customer relationships, noting that any protection should have been achieved through a properly drafted non solicitation covenant. The Claimant also fell down on “the Quilter point” as it could not be shown that a six-month restriction was reasonably necessary from the outset of employment, including during the probationary period when the Defendant had a one-week notice period and had not had the opportunity to develop customer relationships. Accordingly, the Claimant’s claims for injunctive relief were dismissed, and the interim injunction was discharged. The case emphasises the importance of properly drafted covenants, including appropriate carve-outs, without which a covenant which might otherwise have been enforceable, may be found not to be. (Huws Gray Ltd v Daniel Gentleman)
Trade unions
Government publishes revised Code of Practice on electronic and workplace balloting.
On 23 June 2026, the government published its response to the consultation on the draft code of practice on electronic and workplace balloting, together with a revised draft code of practice. The Code of Practice provides detailed guidance on the operation of new voting methods for statutory trade union ballots. The guidance covers electronic voting, hybrid voting and workplace (in-person) voting. It also covers safeguards to maintain database integrity and secure systems. The code does not create legal obligations itself but will be relevant evidence in tribunal or court proceedings. Subject to Parliamentary approval, the Code is expected to come into force in August 2026.
EAT confirms dismissal for abusive and threatening WhatsApp messages was not for trade union activities.
The EAT has upheld the dismissal of the Claimant for gross misconduct after the Claimant posted abusive and potentially threatening messages in a workplace union WhatsApp group. The EAT found no error in the Tribunal’s rejection of his automatic unfair dismissal claim under s.152 TULR(C)A 1992. The Claimant, a delivery driver and union member, posted two messages in a workplace union WhatsApp group during an industrial dispute including an abusive comment about the employer and a message referencing violence towards colleagues who did not support strike action. Following a complaint, the Claimant was dismissed for gross misconduct on the basis that the messages were threatening and intimidating and in breach of workplace policies. The key issue was whether the posts constituted participation in trade union activities; the EAT confirmed this is a fact sensitive evaluative exercise and not subject to any rigid “threshold” test, and that the Tribunal was entitled to conclude the messages (including a reference to violence) were conduct separable from union activity rather than part of it. The ET had correctly applied the law and reached a permissible conclusion that the Claimant was dismissed for misconduct, not for engaging in protected trade union activities. (Young v Royal Mail Group)
Employee relations
Government launches consultation on zero hours contracts.
On 02 June 2026, the government published ‘Make Work Pay: ending one-sided flexibility – reforms of zero hours and similar contracts’. The consultation sets out detailed proposals to implement new rights under the Employment Rights Act 2025 relating to guaranteed hours, a right to reasonable notice of shifts and a right to payment for shifts cancelled. The consultation invites responses on what the hours threshold for eligibility should be, the length of the reference period and definitions of regular working patterns and exemptions. The consultation closes on 25 August 2026.
Consultation on carers’ rights published.
On 09 June 2026, the government launched a consultation on strengthening rights for unpaid carers and parents of seriously ill children. Key proposals under consideration include: (i) extending unpaid carer’s leave beyond the current 5 day entitlement; (ii) introducing a longer period of leave with a statutory “right to return” to employment; (iii) exploring paid carer’s leave, and inviting input on the appropriate duration and level of remuneration; (iv) improving guidance, awareness and workplace support for carers, and (v) considering a new entitlement (“Hugh’s Law”) for parents of seriously ill children, potentially including paid leave and job protection. The consultation forms part of the “Make Work Pay” reforms and does not set out firm proposals, but instead seeks evidence on how to balance support for carers with employer impacts. The consultation closes on 1 September 2026.
DEI
EAT finds that Respondent ought to have asked supplemental questions about the Claimant’s health condition.
The EAT has held that the ET erred in its approach to whether the Respondent had actual or constructive knowledge of the Claimant’s disability, and failed to properly consider reasonable adjustments. The Claimant worked as a television presenter for BBC Scotland. The team worked on an eight-week rota taking variable shifts. Some shifts started early (from 5am) and some finished late (around midnight) and some finished very late (sometimes until 3am). On 10 March 2023, the Claimant informed the Respondent of her diagnosis of type 2 diabetes and fatigue. In April, the Claimant asked for adjustments to be made – and she was removed from the early shift and the latest shifts. On 7 June 2023, the Claimant made a broadcasting error – she was late starting a live news broadcast. This led to a formal disciplinary process (although no further action was recommended), after which the Claimant brought claims for discrimination arising in consequence of disability and a failure to make reasonable adjustments. At first instance, the ET held the Respondent did not and could not reasonably have been aware that the Claimant was disabled until they received Occupational Health advice relating to this. The EAT, however, allowed the Claimant’s appeal in relation to knowledge of disability, and remitted the reasonable adjustments claim for reconsideration. In reaching this conclusion, the EAT confirmed that employers must consider both what they knew and what reasonable enquiries would have revealed, and may be under a duty to make further enquiries where available information suggests a disability. The ET also failed to assess whether it would have been reasonable to excuse the Claimant from all late shifts – and whether adjustments should have been made during the period when the Respondent was questioning the occupational health advice. (Marguerite Andrea Cunningham v British Broadcasting Corporation)
EHRC publishes research into workplace harassment.
On 25 June 2026 the EHRC published Our research into workplace harassment. The research highlights that harassment remains prevalent but often underreported, with structural factors such as hierarchy, male-dominated workforces, insecure work and poor leadership increasing risk. It emphasises that legal developments, including the preventative duty under the Worker Protection Act 2024, are driving a shift towards proactive organisational responsibility, but that policies alone are insufficient without consistent implementation and cultural change. The evidence indicates that effective prevention requires a combination of data driven insights, accessible reporting mechanisms, tailored and repeated training, and strong leadership at all levels, particularly middle managers, alongside targeted interventions addressing specific organisational risk areas. Overall, the research concludes that meaningful and sustained change depends on embedding anti harassment measures into governance, performance and culture, rather than relying on reactive or compliance driven approaches.
