In HMRC v HFFX LLP and others [2024] EWCA Civ 813 (19 July) the Court of Appeal (CA) considered appeals by both HMRC and the individual members of a limited liability partnership (LLP) relating to deferred profit allocation/reallocation incentivisation arrangements ruling that discretionary payments to LLP members were taxable as miscellaneous income that amounted to a ‘source’ from which the receipt of the ‘special capital’ was derived.
GSA an investment management business had transferred its high-frequency foreign currency trading team to the LLP whereupon members of that trading team (being the individual taxpayers in the appeal) became self-employed members of the LLP for tax purposes. Broadly speaking under the incentivisation arrangements (and pursuant to the applicable partnership deed) 50% of the pay-out of the profits earned by the business that the individual members would receive was allocated to a corporate member of the LLP. The allocated...
