Hedge fund billionaire Michael Platt suffered an expensive defeat this week when the UK Supreme Court dismissed BlueCrest Capital Management's appeal, potentially costing the firm £200mn. The ruling centers on an aggressive tax structure that Platt's family office used to reduce traders' tax bills by routing profits through a corporate entity before returning them as deferred capital.

BlueCrest's partner incentivisation plan, established in 2008, redirected profits to a corporate entity that paid corporation tax rather than income tax. This arrangement drew HMRC scrutiny, and a tax tribunal ruled against the firm in 2023, finding the returned payments were taxable income. The structure differed sharply from industry norms, with one lawyer calling it "on the more aggressive side" and another describing it as "crazy."

The firm's troubles extend beyond the tax dispute. BlueCrest paid $170mn to the SEC and $101mn to the UK's FCA after investors discovered top traders had been moved to an internal employee fund while external money was managed by underperforming algorithms. These conflicts prompted Platt to return outside capital in 2015, transforming the firm into primarily managing his personal wealth.

The Supreme Court rejected BlueCrest's argument that its 80-plus members were genuine partners eligible for partnership tax breaks. Judges found most compensation came from discretionary allocations based on individual trading performance, not overall firm profits. Platt's dominant influence over the organization further undermined claims of meaningful partnership control among multiple members.