UK Supreme Court upholds income tax treatment in Alex Gerko trader profits case

Traders Union
All News
Financial News
UK court upholds trader tax

Highlights

UK Supreme Court rules traders like Alex Gerko must pay income tax, not corporation tax, on profit shares earned at GSA Capital from 2010–2015.
Judges unanimously dismiss HMRC's appeal to tax traders based on indicative profit letters, requiring actual profit confirmation for assessment.
The decision affirms HMRC's stance on deferred profit-sharing arrangements, clarifies personal versus corporate taxation for financial sector compensation.

Supreme Court ruling on trader profit taxation

As reported by the Financial Times, the UK’s Supreme Court rules on Wednesday that traders should pay income tax on their share of trading profits, rejecting the position advanced by Gerko and a group of traders he managed. XTX had challenged the tax treatment at the Supreme Court after losing in lower courts, arguing in 2024 that the approach results in “massive double taxation” and carries wider implications for the financial industry.

The dispute pits Gerko and the traders against HM Revenue & Customs over profits made while they worked at hedge fund GSA Capital from 2010 to 2015. The payment plan is structured so the traders are paid as much as a 50 per cent share of profits over three years, and XTX believed the trading unit should be taxed at corporation tax rates rather than having individuals taxed at higher income tax rates.

The judges say the traders’ profits are “income charged to income tax” and add that “there is no relevant overlap” between taxing the company’s profits and taxing deferred profits received by individuals. In the judgment, the court refers to HMRC lawyers’ comparison between this arrangement and the distinction under which a company pays tax on profits while shareholders pay tax on dividends.

The court also unanimously dismisses an HMRC appeal on a separate point concerning whether the traders should be taxed on presumed profit shares set out in “indicative” letters from Gerko. Judges reject the tax authority’s argument that tax should be based on the amounts listed in those letters before the traders’ actual share of profits is confirmed.

Implications for XTX and the UK financial sector

Gerko is one of the UK’s biggest single taxpayers, paying £202 million last year and £665 million in tax in 2024, according to Sunday Times estimates. He spun out XTX from GSA Capital in 2015 with the small group of traders involved in the case, and the firm has since grown into one of the world’s biggest trading houses, handling $250 billion in daily trades across stock, bond, currency and commodities markets.

XTX declines to comment on the Supreme Court ruling. HMRC says it welcomes the decision, which confirms its position that the arrangements discussed in the ruling are ineffective, and adds that it is committed to pursuing those who avoid paying their fair share of tax.

The decision is likely to reinforce HMRC’s stance on deferred profit-sharing arrangements used in parts of the trading industry. For UK financial firms, the ruling sharpens the distinction between corporate taxation and the personal tax liabilities of individual traders receiving profit-linked compensation.

Our earlier coverage of the UK bank leverage ratio debate examined growing regulatory scrutiny over whether policymakers should ease this post-crisis capital backstop. We outlined how reducing the ratio could give banks more flexibility but potentially weaken resilience, with knock-on effects for lending capacity, risk appetite, and confidence across the UK financial system.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.