22 January 2026

HMRC v The Boston Consulting Group UK LLP and others v HMRC [2026] UKUT 00025 (TCC)

In HMRC v The Boston Consulting Group UK LLP and others v HMRC [2026] UKUT 00025 (TCC) the Upper Tribunal dealt with a long-term incentive arrangement for the UK partners of one of the world’s leading consultancies. Partners were given “Capital Interests” and payments on long service or retirement were made in respect of these “Capital Interests”.

BCG argued that this represented the sale of part of the capital or goodwill of their business and was eligible for CGT treatment. HMRC successfully argued that these payments gave rise to income tax.

This case involved a detailed consideration of the LLP Agreements, with HMRC using a mixed team of tax and partnership specialists (Thomas Chacko and Ronan Magee of Pump Court Tax Chambers, Jeremy Callman, Elizabeth Atkinson and Helen Bunce of Ten Old Square).  The taxpayers were represented by Sam Grodzinski KC of Blackstone, John Machell KC of Serle Court and Marika Lemos KC of Devereux. The flexibility inherent in LLP structures means the true analysis of members’ rights and interests in LLP capital, which may be of great importance for tax purposes, can be extremely complex. This case, where the Tribunal rejected the labelling chosen in the LLP Deeds in favour of a detailed consideration of the rights produced, will be highly relevant to such questions in the future.

The case includes detailed consideration of the Mixed Member Partnership rules in ITTOIA s850C in the first application of these rules by the UT in the context of a major professional services firm. Overturning the FTT, the Tribunal held that these rules were satisfied and that the individual members were therefore taxable in the year of allocation.  For years prior to the introduction of these rules, the UT agreed with the FTT that the miscellaneous income rules in ITTOIA s687 or the Sales of Occupation Income rules (ITA Part 13 Chapter 4) were satisfied.

The case also considered several important procedural matters – in particular finding that BCG had been careless, that that carelessness had brought about the loss of tax (in the light of the recent CA decision in Mainpay) and, overturning the FTT, that BCG was careless on behalf of the individual Partners (within the meaning of the statutory phrase) when the LLP instigated the tax avoidance scheme, failed to take adequate advice, and obtained advice on how the members should complete their individual self-assessments.  This meant that HMRC were entitled to use extended time limits against both the LLP and the individual members.

Thomas Chacko, Jeremy Callman, Ronan Magee, Elizabeth Atkinson and Helen Bunce acted for HMRC.

You can read a copy of the judgment here.