On 5 May 2026, Mr Justice Michael Green handed down a judgment that every CFO advising on or operating in a distressed business needs to read. In Re Waldorf Production UK Plc [2026] EWHC 1014 (Ch), the High Court sanctioned a £205 million restructuring plan over HMRC’s outright opposition — the first time the cross-class cram-down power under Part 26A of the Companies Act 2006 has been exercised against HMRC following the Court of Appeal’s Adler/Thames Water/Petrofac trilogy. The case resolves, at least at first instance, three questions that have been live in restructuring rooms for years: Can HMRC be crammed down? What does the “no worse off” test actually cover? And can tax losses acquired through a deal constitute a valid restructuring benefit? The answers matter well beyond the oil and gas sector.
Background: What Waldorf Is, and Why It Failed the First Time
Waldorf Production UK Plc is a North Sea oil and gas company that accumulated approximately $94 million in unpaid Energy Profits Levy (EPL) liabilities from 2022 to 2024. The EPL — the windfall tax levied on upstream oil and gas profits at an effective combined rate of 78% since November 2024 — crushed Waldorf’s liquidity while simultaneously generating massive ring-fence losses. By the time RP2 was promoted, the group held approximately $4.6 billion of ring-fence tax losses, which Harbour Energy (a listed FTSE 250 oil and gas acquirer) valued at around $900 million of future tax shielding.
Waldorf’s first restructuring plan (RP1) was refused sanction in August 2025 by Hildyard J on the grounds that the plan company had failed to engage meaningfully with its unsecured creditors — principally HMRC and Capricorn Energy. The lesson: procedural failures kill plans regardless of substantive merit. RP2 learned from that. The plan company conducted extensive negotiations, including a two-day mediation in October 2025, at which Capricorn settled. HMRC declined to attend. That decision came back to haunt HMRC in the judgment.
The Structure of RP2: A $205 Million Sale Conditional on Extinguishing the Tax Debt
Harbour Energy agreed to purchase eight Waldorf group companies for $205 million (approximately $170 million net of leakage) — but only on condition that RP2 extinguished the EPL liabilities in full. Under RP2, HMRC received 14% of its claim: a material recovery, but far from full payment. All other plan creditors supported the plan. HMRC alone voted against. The court applied the cross-class cram-down power under s.901G Companies Act 2006 to override HMRC’s dissent.
As Kirkland & Ellis note, this marks the first cramdown of HMRC under the full post-Adler/Thames Water/Petrofac framework — a significant step up from the earlier Re Houst and Prezzo cases in which HMRC raised no jurisdictional objection.
HMRC’s Three Objections — and Why Each Failed
Jurisdiction to cram down HMRC. HMRC argued for the first time that its constitutional mandate to collect taxes gave it an effective veto over Part 26A plans. The judge rejected this firmly. Parliament did not exclude HMRC from Part 26A, and to grant a veto would fundamentally undermine the rescue culture the legislation was designed to protect. HMRC is a creditor like any other — an involuntary one, yes, entitled to considerable weight in the discretion exercise, but not to a right of refusal. The Crown is bound by Part 26A by necessary implication.
The “no worse off” test and the tax losses. HMRC’s most technically ambitious argument was that the no worse off test should encompass the future tax shielding Harbour would obtain from the acquired losses — a potential $924 million Exchequer benefit to Harbour and cost to the public purse. The judge, applying Petrofac ([2025] EWCA Civ 821), held that the test is narrow: confined to the financial value of HMRC’s existing rights being compromised by the plan. Future tax relief that Harbour may obtain from losses acquired as assets is not a right of HMRC that is compromised by RP2. It fell outside the statutory test entirely. As Paul Hastings’ detailed analysis of the judgment explains, this is a bright-line rule with lasting implications for restructuring M&A.
Even setting the legal point aside, the factual battle was lost by HMRC. Its expert (from Forvis Mazars) estimated a net Exchequer loss of $17.9 million — but only on the assumption of 100% utilisation of both existing ring-fence losses and forecast decommissioning losses simultaneously. The plan company’s expert demonstrated under cross-examination that 100% utilisation of both is technically impossible due to the ordering rules for ring-fence losses, investment allowance displacement, and the practical difficulty of realigning assets with loss-holding entities. On every realistic scenario, the Exchequer is better off under RP2 than in formal insolvency — where HMRC receives near-zero on EPL liabilities and the Crown bears 50% of decommissioning costs via Decommissioning Relief Deeds.
Abuse of process. HMRC argued Harbour — a profitable FTSE 250 company — was using Part 26A to buy a $900 million tax benefit while extinguishing a tax bill it could afford to pay. The judge rejected this too. Compromising a tax liability through a restructuring plan is not inherently abusive. There was no alternative buyer. The SPA’s conditionality on EPL extinguishment was Harbour’s commercial requirement, not a mechanism designed to circumvent the law. HMRC retains its existing anti-avoidance armoury — including the General Anti-Abuse Rule and the major change in trade rules under Part 14 Corporation Tax Act 2010 — should Harbour seek to exploit the losses abusively.
The Mediation Point: HMRC’s Own Conduct Undermined Its Fairness Complaint
One of the more striking passages in the judgment concerns mediation. HMRC refused to attend the October 2025 mediation at which every other creditor reached agreement. Its reasons — internal authorisation constraints, resource pressures, precedent risk — were treated by the court as “unhelpful” given that HMRC’s own objections in RP1 had centred on inadequate engagement. As ICLG reports, the court was unconvinced by HMRC’s stated reasons. Having complained about inadequate consultation in RP1, then declining the opportunity to participate in RP2’s mediation process, HMRC found its fairness arguments significantly weakened.
For practitioners, the lesson is clear: post-Thames Water ([2025] EWCA Civ 475), genuine creditor engagement — including with HMRC — is a process condition, not a box to tick. HMRC will need to develop its institutional approach to restructuring mediations or accept that courts will give its subsequent objections reduced weight.
What the Waldorf Ruling Means for CFOs: Six Practical Action Points
1. HMRC has no veto in Part 26A restructurings. This is the headline. If your distressed business has significant HMRC creditors — tax arrears, EPL, PAYE — a well-constructed restructuring plan can proceed over HMRC’s objection. HMRC is an involuntary creditor entitled to considerable weight, but not to a right of refusal. That is a material shift in the negotiating landscape.
2. Tax losses are acquirable through distressed M&A. A buyer who values accumulated tax losses can factor them into deal pricing and structure the acquisition through Part 26A, provided the plan satisfies the no worse off test and is otherwise fair. The future utilisation benefit to the buyer falls outside the statutory no worse off test. As Grant Thornton’s restructuring team notes, this opens a significant new dimension in distressed M&A analysis.
3. Expert evidence on tax loss utilisation is now a battleground. The case turned, in part, on forensic analysis of loss utilisation rates. If you are proposing or opposing a plan where tax losses are a deal driver, you need independent tax expert evidence that goes beyond headline loss quantum. The technical ordering rules, investment allowance displacement, and asset realignment constraints are all live issues that courts will examine in detail.
4. The “no worse off” test is narrow — and that cuts both ways. Consequential Exchequer impacts, lost future tax revenues, and competitive advantages conferred on a buyer are outside the test. Only HMRC’s compromised rights in the plan company are in scope. Plan designers should model on this narrow basis; plan opponents cannot expand the test by reference to macro fiscal consequences.
5. EPL liabilities remain a structural risk for North Sea operators. The EPL runs at a combined 78% effective rate until March 2030, when the Oil and Gas Price Mechanism (OGPM) replaces it. Companies carrying substantial EPL exposure on their balance sheets are potential restructuring candidates. CFOs in the energy sector should stress-test EPL scenarios against cash flow and decommissioning obligations now, not in a liquidity crisis.
6. HMRC engagement must be structured and early. HMRC will not routinely attend commercial mediations. That is an institutional reality. But the judgment signals that courts expect substantive engagement — written proposals, sequenced responses, genuine dialogue — before a plan goes to sanction hearing. The Freshfields analysis of RP2 suggests structured pre-mediation engagement as a workable alternative for HMRC-creditor situations. Build that process into your restructuring timetable from day one.
What Remains Open: The Supreme Court Question
Michael Green J’s judgment is first-instance. Several questions remain unresolved: what the court would have done had HMRC actually been worse off; whether a court could impose modified plan terms (such as a contingent payment mechanism) as the price of sanction; and the distinction between terminal and rescue plans for fairness purposes. HMRC may seek permission to appeal. Given that the leapfrog route to the Supreme Court has already been navigated in this litigation, a direct appeal to the Supreme Court bypassing the Court of Appeal is plausible. CFOs and restructuring advisers should treat the present ruling as authoritative but watch for appellate developments through 2026 and into 2027.
The Bottom Line
The Waldorf judgment rebalances the restructuring toolkit in favour of plan companies and their creditor constituencies. HMRC is now demonstrably subject to cram-down, the no worse off test has been narrowed to compromised rights only, and tax losses can legitimately feature as restructuring benefits in the fairness analysis. For CFOs navigating distressed situations — particularly in energy, but also in any sector carrying significant HMRC creditor exposure — this judgment changes the calculus. The question is no longer whether HMRC can block a plan. The question is whether you have built the factual and engagement record to satisfy the court that HMRC’s interests have been properly considered.
If you are working through a restructuring scenario, EPL exposure, or distressed M&A where tax losses are a material consideration, contact Mark Hendy at Tanous to discuss the tax structuring and CFO advisory implications.