After losing a major legal battle before the Court of Appeal, partners at billionaire Michael Platt’s investment firm BlueCrest Capital will be liable for income taxes on a pay system dating back to 2008.
The court in London ruled that the plan of the UK-based group to retain employees through so-called “special capital” should be subject to income tax, not the lower rate corporation tax.
The court stated that BlueCrest, at one time one of the largest hedge funds in the industry, created the Partner Incentivisation plan scheme in order to retain staff in a highly competitive market. According to the court ruling last week, the scheme was first scrutinized by the UK tax authority in 2010.
In the judgement, Sir Launcelot, one of the judges who presided over the appeals court concluded that the PIP awards were income.
The judge said in a ruling first reported by Bloomberg that it was important to not be mesmerized by the word “capital” in the phrase “special capital”. The phrase is nothing more than a tagline.
In the ruling, he said that partners who received PIP awards were liable for income tax. The case was heard by Lady Justice Falk and Lord Justice Lewison.
HM Revenue & Customs announced on Thursday that they were “pleased” by the decision. “We will pursue those who create contrived schemes to avoid paying tax.”
The Court of Appeal has upheld a previous decision which ruled that HMRC was wronged in the allocation of profits under the incentive scheme.
BlueCrest has declined to comment.
After a decline in assets, and a string of poor returns, the firm announced, at the beginning of December 2015, that it would cease managing money for clients outside the family and become a private office.
BlueCrest still has a partner incentive plan but now trades primarily bond strategies on developed and emerging markets. It is also expanding into commodities.
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