Salaried member rules for LLPs: the three conditions
Last updated: October 20, 2026
By the Glasscubes editorial team
Short answer: an LLP member is taxed as an employee (a “salaried member”) only if all three conditions in ITTOIA 2005 ss863B–863D are met: at least 80% of their pay is expected to be “disguised salary” (Condition A), they have no significant influence over the LLP’s affairs (Condition B), and their capital contribution is less than 25% of that disguised salary (Condition C). Fail any one and the rules do not apply. Since HMRC v BlueCrest [2026] UKSC 18, the influence in Condition B must come from the LLP’s formal governance and relate to the LLP as a whole.
The three conditions
| Condition | The test | Statute |
|---|---|---|
| A — disguised salary | It is reasonable to expect that at least 80% of the amounts payable to the member for their services will be fixed, or variable without reference to the LLP’s overall profits or losses (or not in practice affected by them). | s863B |
| B — no significant influence | The mutual rights and duties of the members, and of the LLP and its members, do not give the member significant influence over the affairs of the partnership. | s863C |
| C — capital contribution | The member’s contribution to the LLP is less than 25% of the disguised salary expected for the tax year. | s863D |
When the conditions are tested
- Conditions A and C are tested at the start of each tax year (or when the member joins), and again whenever the arrangements or circumstances change.
- Condition A is also looked at again after each relevant period, against what was actually paid.
- The rules have applied since 6 April 2014, and only to LLPs. General and limited partnerships are outside them.
Condition B after BlueCrest
The Court of Appeal (January 2025) and then the Supreme Court (HMRC v BlueCrest Capital Management (UK) LLP [2026] UKSC 18, 1 July 2026) both found for HMRC on Condition B. The influence that counts is influence that comes from the LLP’s constitutional or statutory governance framework and bears on the LLP as a whole. Running a desk, a team or a portfolio, however senior, does not of itself amount to significant influence. The case has been sent back to the First-tier Tribunal on the facts.
Condition C and the anti-avoidance rule
Section 863G disregards arrangements whose main purpose, or one of whose main purposes, is to stop the rules applying. HMRC’s guidance at PM259200 (updated October 2026) says that a genuine contribution, intended to be enduring and carrying real risk, will not trigger that rule, even if it is loan-funded or topped up periodically to keep it above 25%.
Sources
- ITTOIA 2005 s863B — Condition A
- ITTOIA 2005 s863C — Condition B
- ITTOIA 2005 s863D — Condition C
- ITTOIA 2005 s863G — anti-avoidance
- HMRC Partnership Manual PM250000 — salaried members
- HMRC Partnership Manual PM259200 — capital contributions and the TAAR
- HMRC v BlueCrest Capital Management (UK) LLP [2026] UKSC 18
Checked against the sources above on 16 October 2026. General information, not advice on a particular member’s position.
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