Last checked: 1 July 2026
Editorial note: This article was checked primarily against the full UK Supreme Court judgment in Commissioners for HMRC v HFFX LLP; Atkins and others v HMRC [2026] UKSC 17 and the court’s accompanying press summary. Financial and business reporting was used only for the reported value of the dispute and the parties’ public reactions.
Review status: The content has been source-checked against primary legal materials. No review by a solicitor, barrister or chartered tax adviser is claimed unless a named and appropriately qualified reviewer is added by the publisher.
This is informational, not financial, tax or legal advice. Tax outcomes depend on the legislation, contracts, accounting periods and evidence applying to each case. Individuals and businesses should obtain advice from a suitably qualified UK tax professional before acting on this information.
The Alex Gerko HMRC tax dispute ended at the UK Supreme Court on 17 June 2026 with an unusual split outcome. Gerko and 12 other individual members lost their appeal against Income Tax on deferred remuneration, while HMRC also lost its separate appeal concerning the earlier attribution of partnership profits.
The linked proceedings were HMRC v HFFX LLP and Atkins and others v HMRC. Both were decided in the same unanimous judgment, reported as [2026] UKSC 17.
The dispute concerned a Capital Allocation Plan operated through HFFX LLP while Gerko and the other traders worked within the GSA investment-management business. It did not arise from a remuneration arrangement created or operated by XTX Markets.
Quick Answer: What Happened in the Alex Gerko HMRC Tax Dispute?
The Supreme Court unanimously decided that the “Special Capital” received by Gerko and the other individual members was taxable as income under section 687 of the Income Tax (Trading and Other Income) Act 2005.
The court found a sufficient source for the income in the individual members’ rights under the HFFX LLP deed, combined with the decisions made by Gerko and GSA Member Limited, known as GSAM, when operating the Capital Allocation Plan.
However, the court rejected HMRC’s alternative argument under section 850. The individual members did not have contractual rights during the relevant accounting periods to receive the sums described in their indicative allocation letters.
Those amounts could not therefore be treated automatically as their partnership profit shares at that earlier stage.
In simple terms, the individual members remained liable for Income Tax when the deferred money was received, but HMRC could not use its broader interpretation of the original profit-sharing arrangements to tax those amounts under section 850.
Both connected appeals were dismissed, as confirmed by the Supreme Court judgment.
Who Is Alex Gerko?
Alexander “Alex” Gerko is a trader and the founder of XTX Markets. For the purposes of this dispute, his legally relevant role was as the managing member of HFFX LLP, a foreign-exchange trading business established within GSA in 2010.
HFFX’s individual members formed a team involved in researching, designing and implementing software for automated, high-frequency foreign-exchange trading. The partnership also had corporate members, including GSAM.
Before HFFX was established, the team had been entitled to a percentage of the profits generated by its work. Gerko exercised discretion over how that remuneration was divided among team members.
The arrangements considered by the Supreme Court were introduced when HFFX was created in 2010. The Capital Allocation Plan ended in 2015 when the HFFX business was transferred to XTX, an entity led by Gerko and independent of GSA.
XTX is therefore relevant to Gerko’s later business career, but it should not be described as the company that devised or operated the disputed Capital Allocation Plan.
What Was the Tax Dispute About?
The case concerned how profits generated through HFFX’s activities were allocated, retained and later made available to its individual members.
Under the Capital Allocation Plan, a proportion of the profits that might otherwise have been allocated to participating individual members was instead allocated to GSAM, a corporate member of HFFX.
GSAM paid Corporation Tax and its operating expenses before investing the remaining amount in GSA funds. The investments were generally sold in three annual tranches, and the net proceeds were contributed back to HFFX as “Special Capital”.
GSAM could then exercise its discretion to reallocate that Special Capital to individual members, who were able to withdraw it after the reallocation had been made.
The intended tax analysis was that GSAM would pay Corporation Tax on the profits allocated to it, while the later reallocation of Special Capital would not create an additional personal tax charge for the individual members.
The Supreme Court recorded that avoiding or reducing tax liability was one of the plan’s main objects. However, it also accepted that the arrangement had commercial purposes, particularly retaining and incentivising valuable team members.
Members who left in certain circumstances could lose some or all of a potential award, while those who remained with HFFX and complied with their obligations had an incentive to continue contributing to the business.
How Did the Capital Allocation Plan Work?
The arrangement can be understood as a five-stage process:
- HFFX received profits connected with the team’s foreign-exchange trading activities.
- Part of the profit that might otherwise have been allocated to participating individuals was allocated to GSAM.
- GSAM paid Corporation Tax and expenses before investing the remaining funds.
- The investments were sold over approximately three years, and the proceeds were contributed to HFFX as Special Capital.
- Following discretionary decisions, the Special Capital could be reallocated to individual members and withdrawn by them.
Gerko sent GSAM recommendations describing how the potential awards might be divided among team members. Participating members also received indicative letters placing their potential awards within broad monetary bands.
Those letters did not provide an unconditional guarantee that a specified amount would be paid. They explained that the recommendation could be amended and that the eventual value might rise or fall according to the performance of the underlying investments.
An allocation could also be reduced or changed because of:
- the performance or conduct of the individual member;
- losses or performance issues affecting GSA or HFFX;
- changes in Gerko’s recommendations;
- the arrival of new members;
- whether the individual remained a member on the relevant vesting date; or
- whether the individual was treated as a “good leaver” or “bad leaver”.
The discretion was genuine rather than merely theoretical. The evidence included an example in which an indicative allocation was reduced after a member was treated as a bad leaver, with the amount redistributed to other members.
Why Did HMRC Challenge the Arrangement?
HMRC’s case involved two principal provisions of the Income Tax legislation.
Section 850: partnership profit shares
Section 850 of ITTOIA 2005 determines a partner’s share of a firm’s trading profit or loss for Income Tax purposes according to the firm’s profit-sharing arrangements during the relevant accounting period.
HMRC argued that profits formally allocated to GSAM should instead be treated as profits belonging to the individual members.
Its position was that the wider arrangements, including Gerko’s recommendations and the indicative allocation letters, showed that those amounts were effectively intended for the individuals.
HFFX and the individual members argued that section 850 could not apply because the traders had no contractual entitlement during the relevant accounting periods to receive the sums described in the letters.
Section 687: miscellaneous income
Section 687 of ITTOIA 2005 applies to income from a source that is not charged to Income Tax under another statutory provision.
HMRC’s alternative case was that, even if the individual members were not entitled to the original HFFX profits under section 850, the Special Capital they eventually received was taxable as income under section 687.
The distinction mattered because the two arguments concerned different rights, different receipts and different points in time.
HMRC had also raised an alternative argument concerning the “sales of occupation income” legislation in the Income Tax Act 2007. Because the Supreme Court found that section 687 applied, it did not decide that separate issue and expressly declined to endorse or reject the Upper Tribunal’s reasoning on it.
What Did the Supreme Court Decide?
The five-justice panel unanimously dismissed both appeals in [2026] UKSC 17.
Lord Sales delivered the judgment, with Lord Lloyd-Jones, Lord Hamblen, Lord Burrows and Lady Rose agreeing.
Why the Traders Lost?
The individual members argued that the Special Capital did not have a qualifying “source” for the purposes of section 687.
By the time the case reached the Supreme Court, it was accepted that the payments were not purely voluntary gifts. They were made through the exercise of contractual discretionary powers governed by legal duties, including the requirement that the discretion be exercised rationally and for its proper purpose.
The court held that a source of income can exist where there is a relevant and sufficient factor connecting the income with its recipient.
In this case, the source was the decision-making process through which Gerko and GSAM implemented the Capital Allocation Plan, together with the rights given to the members under the LLP deed.
The individual members had rights within that framework, and favourable decisions resulted in Special Capital being reallocated to them. The receipts were therefore income from an identifiable source and taxable under section 687.
Why HMRC Also Lost?
HMRC’s section 850 argument failed because the individual members did not have contractual rights during the relevant accounting periods to receive the amounts mentioned in their indicative letters.
For section 850 to apply, the firm’s profit-sharing arrangements must establish that a particular share of the firm’s profit or loss is definitively attributable to a partner during that period.
A payment that is commercially likely or expected is not necessarily the same as an enforceable contractual entitlement.
GSAM retained a real discretion to alter, reduce or withhold an allocation. The profits allocated to GSAM could not therefore be treated simultaneously as the individual members’ partnership profit shares under section 850.
The court stressed that the tax legislation had to be applied according to the statutory language and the parties’ contractual rights, rather than a more general view of what HMRC considered to be the commercial reality of the arrangement.
How Could Both Sides Lose?
The parties appealed on separate legal issues.
| Appeal | Argument | Supreme Court result |
| Gerko and the other individual members | The Special Capital was not income from a source under section 687 | Appeal dismissed; the receipts were taxable |
| HMRC | The amounts allocated to GSAM should be treated as the traders’ partnership profit shares under section 850 | Appeal dismissed; no contractual entitlement existed during the relevant accounting periods |
The practical outcome was more favourable to HMRC because the Income Tax assessments based on section 687 remained effective.
However, it would be inaccurate to report that the Supreme Court accepted every argument advanced by HMRC. The tax authority preserved the charge on the Special Capital actually received by the individuals but failed in its attempt to attribute the earlier profits to them under section 850.
The result therefore turned on two different conclusions:
- the individuals did not own the relevant partnership profit shares at the earlier stage; but
- the later receipts were still taxable income from a separate source.
Was £22.5 Million Gerko’s Personal Tax Bill?
Contemporary financial reporting described the dispute as involving approximately £22.5 million in tax.
However, that figure related to the wider proceedings involving Gerko and 12 other individual members. It should not be stated without qualification as a £22.5 million personal tax bill owed solely by Gerko.
The reported £22.5 million figure concerned tax connected with profits earned by the group while working within the GSA business between 2010 and 2015. The Supreme Court judgment does not provide a public breakdown attributing the entire reported amount to Gerko personally.
Headlines stating that Gerko alone was ordered to pay £22.5 million may therefore give readers a misleading impression unless they make clear that the litigation and reported amount involved a group of 13 individual appellants.
Did the Case Involve Double Taxation?
Gerko publicly described the outcome as creating “massive double taxation” and reportedly argued that the combined effective tax rate was approximately 70%.
Those figures and descriptions reflected the individual members’ position. The Supreme Court did not make a factual finding that the effective rate was exactly 70%, nor did it rule that unlawful double taxation had occurred.
The legal concern was that GSAM had already paid Corporation Tax on the profits allocated to it before the individual members were charged Income Tax when Special Capital was later reallocated to them.
The Supreme Court rejected the argument that the two charges created the relevant statutory overlap.
It held that GSAM and the individual members were different taxpayers receiving income from separate sources:
- GSAM was taxed on partnership profits allocated to it.
- The individual members were taxed on deferred remuneration arising from later discretionary decisions.
The court found “no relevant overlap” between the two charges. It compared the position to a company paying tax on its profits before using its remaining funds to pay dividends, which may then be taxable as income in the shareholders’ hands.
Tax arising at two stages does not, by itself, mean that the same taxpayer has unlawfully been taxed twice on the same income.
After the ruling, Gerko criticised HMRC’s public response, while HMRC maintained that the arrangements did not prevent the individual Income Tax charge. Those reactions were reported in the post-judgment coverage.
Confirmed Facts and Misleading Claims
Confirmed facts
- The Supreme Court judgment was delivered on 17 June 2026.
- The neutral citation is [2026] UKSC 17.
- The court unanimously dismissed both connected appeals.
- The Special Capital received by the individual members was taxable under section 687.
- HMRC failed to establish that the indicative allocations were partnership profit shares under section 850.
- The arrangement concerned HFFX, GSAM and the GSA business.
- Gerko was one of 13 individual appellants.
- The proceedings were a civil tax dispute.
Claims to avoid
“HMRC won every issue.”
Incorrect. HMRC preserved the section 687 Income Tax charge but lost its section 850 appeal.
“Gerko was convicted of tax evasion.”
Incorrect. This was a civil dispute concerning the interpretation and application of tax legislation. The judgment did not convict Gerko or the other members of a criminal offence.
“XTX Markets operated the disputed plan.”
Misleading. The Capital Allocation Plan operated through HFFX and GSAM within the GSA business. It ended when the HFFX business transferred to XTX in 2015.
“Gerko alone was ordered to pay £22.5 million.”
Potentially misleading. Published reporting associated the approximate figure with the wider group dispute involving 13 individual members.
“The judgment makes every deferred bonus taxable in the same way.”
Incorrect. The result depended on the LLP deed, the legal rights of the members, the operation of GSAM’s discretion and the particular statutory provisions considered by the court.
What Does the Judgment Mean for UK LLPs?
The ruling highlights several practical considerations for LLPs, financial businesses and professional advisers. These are general observations rather than conclusions about any specific organisation.
Contractual Rights Matter
Section 850 focuses on the rights existing during the relevant accounting period.
An estimate, recommendation, expectation or commercially likely payment may not amount to a definitive partnership profit entitlement. The legal effect of the LLP agreement and related documents is therefore critical.
Discretion Does Not Automatically Prevent Taxation
A recipient’s lack of a guaranteed earlier entitlement does not mean that a later receipt will be tax-free.
A structured discretionary process, operating under contractual terms and legal duties, can provide a sufficient source for income under section 687.
Documents Must Be Reviewed as a Whole
Businesses should consider the combined effect of:
- LLP deeds;
- profit-allocation provisions;
- corporate-member arrangements;
- recommendation and approval procedures;
- vesting conditions;
- leaver provisions;
- contractual discretion;
- investment arrangements; and
- the way the structure operates in practice.
The description used for a payment is not necessarily decisive. Its legal and tax treatment will depend on the rights, decisions and transactions that produce it.
The Judgment Is Fact-Specific
The decision does not establish that every mixed-member LLP, corporate-member arrangement or deferred remuneration plan will have the same tax outcome.
Differences in drafting, contractual entitlement, timing, discretion or operational evidence may materially change the analysis. The judgment should therefore not be applied to another structure without professional review.
What Should Businesses Do Next?
Businesses using partnership profit allocations, corporate members or deferred remuneration should consider:
- identifying when each participant acquires an enforceable right;
- distinguishing a contractual entitlement from an indicative expectation;
- checking whether discretionary awards are genuinely capable of being changed;
- reviewing both corporate-level and individual-level tax consequences;
- ensuring that written documents match the arrangement’s actual operation;
- retaining recommendations, resolutions, allocation records and supporting evidence;
- checking whether later legislative changes affect the structure; and
- obtaining specialist tax and legal advice before implementing or altering an arrangement.
The Supreme Court interpreted existing legislation rather than creating a new tax code for all LLP remuneration.
Future cases will continue to depend on the wording of the applicable legislation, the contractual rights established by the documents and the evidence showing how the arrangement operated in practice.
Key Takeaways
The Alex Gerko HMRC tax dispute was not a complete victory on every legal issue for either side.
Gerko and the other individual members remained liable for Income Tax because the Special Capital they received was income from a source under section 687. The source arose from their rights under the LLP deed, combined with the decisions made in their favour under the Capital Allocation Plan.
HMRC nevertheless failed to establish that the earlier indicative amounts were already the individuals’ partnership profit shares under section 850. The members had no contractual entitlement to those sums during the relevant accounting periods.
The case also demonstrates why Corporation Tax paid by one legal person does not automatically prevent Income Tax arising when another person later receives separate income.
Most importantly, the judgment was a civil decision about the tax treatment of a complex deferred remuneration structure. It was not a criminal finding of tax evasion.
Frequently Asked Questions
What was the Alex Gerko HMRC tax dispute about?
It concerned the tax treatment of HFFX profits allocated to a corporate member and later reallocated to individual members through a deferred remuneration arrangement.
Did Alex Gerko win any part of the case?
The individual members lost their section 687 appeal. However, HMRC also lost its section 850 appeal concerning the earlier attribution of partnership profits.
Why were the payments taxable?
The court found that the LLP deed, the members’ rights and the decisions made under the Capital Allocation Plan provided a sufficient source for the income received.
Why did the indicative letters not create a tax liability under section 850?
The letters described potential awards but did not give the members contractual rights during the relevant accounting periods to receive the specified amounts.
Was Alex Gerko found guilty of tax evasion?
No. This was a civil tax dispute about the application of legislation, not a criminal prosecution or conviction.
Was the disputed amount £22.5 million?
Financial reporting placed the wider group dispute at approximately £22.5 million. That figure should not automatically be treated as Gerko’s personal liability.
Was XTX Markets responsible for the arrangement?
No. The Capital Allocation Plan operated through HFFX and GSAM within the GSA business before the HFFX business transferred to XTX in 2015.
Does the decision apply to every UK LLP?
No. It is an important Supreme Court precedent, but its application depends on each LLP’s contracts, rights, profit-sharing arrangements and payment process.