In Nicholas Walewski v HMRC [2021] UKUT0133, the Upper Tribunal (UT) confirmed the operation of the Mixed Memberships rules. It attributed the Limited Liability Partnership (LLP) profits of a corporate member to an individual member for tax purposes after it agreed with the First Tier Tribunal (FTT) that he had the power to enjoy them through a trust created for his children.

This was an appeal against the decision in Nicholas Walewski v HMRC [2020] TC7554.

  • Mr Waleswki (Mr W), an investment adviser, was a partner in two LLP’s; Alken Asset Management LLP (AAM) and Alken Finance LLP (AF).
  • The other partner of AAM and AF was Walewski Limited (WL).
  • WL was a UK company owned by an offshore trust for the benefit of Mr W’s children.
  • Mr W was a director of WL.
  • Mr W was excluded from benefitting from the offshore Trust.
  • Mr W was the only employee of WL, with a contractual salary of £200,000 per year.
  • WL had a 99.9% profit share of AAM and AF.
  • In August 2014 Mr W briefly became an employee of AAM and ceased to be a partner in AAM.
  • HMRC assessed Mr Walewski as having £18,088,195 of profits from AAM and £1,372,510 of profits from AF which had been allocated to WL for the 2014/15 tax year under the Mixed-member partnership rules.
  • Mr W appealed to the FTT.
  • The FTT dismissed the appeal finding that the profit of WL was attributable to Mr W’s ‘power to enjoy’ and was correctly treated as his income for tax purposes.

Mr W appealed to the UT who dismissed his grounds of appeal.

  • There was no direct correlation between partnership profits attributable to Mr W at the time that he was a partner in the year. The profits attributed to Mr W should not, therefore, be reduced in a time apportioned fashion.
  • The FTT was correct in concluding each of W Ltd, AAM and AF did not have distinguishable roles, they were creatures of the appellant who controlled them.
  • The reallocation of profits to Mr W could not be therefore be reduced as WL could not be said to have provided services to the two LLPs to have earned profits.


Given the grounds of appeal, the appellant seemed to have accepted that the rules applied but was trying to argue that the amounts he was taxed on should be reduced. It is important to remember that the Mixed-Member Partnership rules are a tax adjustment and do not reflect the cash movements.

There are relieving provisions for any onward distribution by the corporate member to the individual that has been taxed on those profits. To prevent a large dry tax charge, one would hope that the appellant's structure does not prevent him from obtaining that relief.

Useful guides on this topic

Mixed members: partnerships with company members
The partnership mixed-member rules are anti-avoidance provisions that aim to prevent individual partners from allocating profits from themselves via corporate structures.

Mixed partnerships: profits were enjoyed by individual not companies
In Nicholas Walewski v HMRC [2020] TC7554, the First Tier Tribunal dismissed an appeal against a reallocation of the profits of mixed-member LLPs to an individual partner. There was no evidence the profit allocations were for any reason other than the individual’s power to enjoy them.

Partnerships: How to prepare partnership and partners tax returns
How to prepare partnership returns. How are partnership profits calculated? How are corporate members of partnerships taxed? What are the differences between the tax treatment of individual and corporate partners? Are there anti-avoidance provisions to consider?

How to appeal an HMRC decision
Disagree with a HMRC decision? How to appeal, what type of decision can you appeal, what are your different options when you disagree with HMRC? What are the key steps in making an appeal?

External links

Nicholas Walewski v HMRC [2021] UKUT0133

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