UK Supreme Court Rules Against Alex Gerko in £22.5M Tax Dispute, June 18

The UK Supreme Court ruled on June 17 that traders at foreign exchange firm HFFX must pay income tax on their share of trading profits, rejecting arguments that the arrangement would cause double taxation. Billionaire Alex Gerko and 12 other traders now face a combined tax bill of £22.5 million. The decision settles a long-running dispute over how profit-sharing schemes should be taxed in the financial services industry.

What the Court Decided

The Supreme Court unanimously ruled that traders must pay income tax on profits distributed through HFFX’s deferred remuneration scheme. The court drew a parallel to dividend taxation, where companies pay corporation tax on profits and shareholders then pay income tax on dividends. HFFX was structured to pay corporation tax at up to 24 percent when it received capital from GSA Capital, but HMRC demanded additional income tax at a higher rate on distributions to individual traders.

The Tax Arrangement Under Challenge

HFFX was established in 2010 as a limited liability partnership within GSA Capital to distribute profits to traders and software developers. Under the Capital Allocation Plan, a portion of individual members’ remuneration was retained and invested in GSA funds over three years before being distributed. Gerko, who managed HFFX, argued this structure would result in a 70 percent effective tax rate, calling it unfair double taxation. The Supreme Court judgment rejected this interpretation of tax law.

Impact and Gerko’s Response

The ruling imposes a £22.5 million tax bill on Gerko and 12 other traders. HMRC stated it welcomes the decision and remains committed to pursuing those who avoid paying their fair share of tax. Gerko responded on LinkedIn, accusing HMRC of gloating and stating that the effective tax rate now reaches 70 percent. Analysts noted the ruling sets precedent for how profit-sharing schemes in financial services will be taxed going forward.

Broader Implications for the Sector

Gerko had warned the court’s approach could lead to widespread double taxation across the financial industry. The Supreme Court rejected this argument, establishing that income tax applies to trader distributions regardless of prior corporation tax paid at the partnership level. The decision applies to profits generated between 2010 and 2015 at GSA Capital and affects the 13 individual traders named in the case.

Final Thoughts

The Supreme Court’s unanimous ruling confirms traders must pay income tax on deferred profits, settling a dispute that could have set precedent for the entire financial sector. Gerko and 12 others now owe £22.5 million in back taxes.

FAQs

Disclaimer:

The content shared by Meyka AI PTY LTD is solely for research and informational purposes.  Meyka is not a financial advisory service, and the information provided should not be considered investment or trading advice.