On 5 May 2026, the High Court handed down a judgment that every CFO of a distressed UK company — and every PE house with portfolio exposure — needs to read. In Re Waldorf Production UK Plc [2026] EWHC 1014 (Ch), Mr Justice Michael Green approved a £160 million-plus restructuring plan over HMRC’s objections, using the cross-class cram-down power under Part 26A of the Companies Act 2006. For the first time in English restructuring law, HMRC was crammed down against its will — and the court made absolutely clear that HMRC has no constitutional veto over these proceedings.
The implications stretch well beyond North Sea oil. This case rewrites the playbook for distressed M&A, tax loss monetisation, and the management of HMRC as a creditor in any corporate restructuring. Here is what you need to know.
The Facts in Brief
Waldorf Production UK Plc was a North Sea oil and gas producer sitting on approximately US$94 million of unpaid Energy Profits Levy (EPL) liabilities and a staggering US$4.6 billion in accumulated ring-fence tax losses. Harbour Energy plc, a FTSE-250 acquirer, identified those losses — publicly valued at around US$900 million of future tax shielding — as the primary commercial driver for its US$205 million offer to buy the Waldorf group.
The condition Harbour imposed was non-negotiable: the EPL liabilities had to be extinguished as part of the deal. HMRC voted against the plan. Every other creditor class voted in favour. That forced the court to exercise the cross-class cram-down power under section 901G of the Companies Act 2006, binding HMRC to a plan it had rationally opposed.
This was Waldorf’s second restructuring plan. The first — RP1 — had been refused sanction by Hildyard J in August 2025 because Waldorf had failed to engage meaningfully with its unsecured creditors. RP2 corrected that failure, including a two-day mediation in October 2025. HMRC declined to participate in the mediation. The court found that refusal “unhelpful” — a characterisation that carries real weight in the fairness analysis.
HMRC Has No Constitutional Veto
HMRC’s central jurisdictional argument was novel: its constitutional mandate to collect taxes, it argued, meant the court simply could not override its rational decision to oppose the plan. The judge rejected this firmly and without qualification.
The court held that there is no jurisdictional bar to cramming down HMRC under Part 26A. Parliament has not expressly excluded HMRC from the regime. Given that HMRC is a creditor of most companies in financial difficulty, excluding it would fundamentally undermine the rescue culture the legislation is designed to promote. HMRC is bound by Part 26A by necessary implication.
The court did not dismiss HMRC’s position entirely. Citing Re Nasmyth Group Limited [2023] EWHC 988 (Ch), the judge confirmed that HMRC’s views as an involuntary creditor must be accorded “considerable weight” in the discretion exercise. But considerable weight is not a veto. Plans involving HMRC must demonstrate genuine engagement, a credible no-worse-off analysis, and overall fairness — and if they do, the court will sanction them.
As Kirkland & Ellis notes, this is the first cramdown of HMRC following the Court of Appeal’s trilogy of restructuring plan judgments in Adler, Thames Water, and Petrofac. The legal architecture is now settled at first instance. An HMRC appeal — possibly direct to the Supreme Court via the leapfrog route already navigated in this very litigation — cannot be ruled out, but practitioners should treat this as the definitive statement of the law for now.
The “No Worse Off” Test: Narrow by Design
HMRC’s most technically significant objection concerned the “no worse off” test under section 901G(3). HMRC argued the court should take into account the wider loss to the Exchequer from Harbour’s future use of the acquired tax losses — a potential US$924 million reduction in future corporation tax receipts. If that were factored in, the argument went, HMRC was clearly worse off under the plan than in the counterfactual of insolvency.
The court, applying the Court of Appeal’s reasoning in Petrofac [2025] EWCA Civ 821, held that the no-worse-off test is deliberately narrow. It is confined to the financial value of the creditor’s existing rights being compromised by the plan. Future tax relief that Harbour might obtain from losses it acquires is not a right of HMRC being compromised by RP2. It falls outside the statutory test entirely.
Even on the facts, the court found HMRC would be better off under RP2 than in formal insolvency — where HMRC would receive near-nothing on EPL liabilities and the Exchequer would bear 50% of decommissioning costs via Decommissioning Relief Deeds. HMRC’s own expert accepted in cross-examination that his 100% tax loss utilisation assumption was unrealistic. That concession was decisive.
Tax Losses as Restructuring Benefits — Not HMRC’s Contribution
The fairness analysis produced the most nuanced part of the judgment. The judge declined to treat the US$4.6 billion of ring-fence losses as simply a corporate asset irrelevant to HMRC. Where tax losses are a major driver of the deal and will obviously affect HMRC’s position, they fall within the “benefits preserved or generated by the restructuring” — a concept developed in the Thames Water Court of Appeal decision.
But acknowledging the losses as relevant to fairness did not mean HMRC was treated unfairly. Both HMRC and the M&A creditor received 14% recovery on their respective compromised liabilities. Parliament has not given HMRC preferential status under Part 26A. HMRC has previously accepted reduced recoveries in other plans and CVAs without objection. The court found no compelling reason to treat it differently here.
Grant Thornton’s restructuring commentary highlights the significance of HMRC having declined mediation — a factor the court treated as undermining HMRC’s own fairness complaints. Going forward, plan companies should expect courts to scrutinise the quality of creditor engagement, including whether HMRC was genuinely invited to the table.
What This Means for CFOs: Six Practical Points
1. Distressed situations with tax losses now have a clear exit route. If your business or a portfolio company sits on significant carried-forward losses and faces financial difficulty, Part 26A is now a confirmed mechanism for structuring a sale that preserves those losses and extinguishes legacy tax liabilities — provided the plan is fair and the no-worse-off test is met. Paul Hastings’ detailed analysis is essential reading for advisers structuring these deals.
2. Engage HMRC early and genuinely. This case turned in part on the quality of engagement. RP1 failed because Waldorf did not engage with unsecured creditors. RP2 succeeded — in part — because it did. HMRC’s refusal to attend mediation was used against it. Build HMRC engagement into your restructuring timeline from day one, not as an afterthought.
3. Expert evidence on tax loss utilisation is now mission-critical. The factual battleground in Waldorf was the realistic rate at which ring-fence losses could be utilised. HMRC’s expert assumed 100% utilisation simultaneously across multiple loss buckets. The plan company’s expert showed this was technically impossible. If your restructuring involves significant deferred tax assets, commission independent expert evidence on utilisation assumptions before the plan hearing — not during it.
4. The EPL context matters — but the principle is general. Waldorf’s EPL liabilities arose from the Energy (Oil and Gas) Profits Levy Act 2022, a windfall tax on North Sea producers. But the legal principles — HMRC’s status as a plan creditor, the scope of the no-worse-off test, the relevance of tax losses in the fairness analysis — apply to any Part 26A plan where HMRC is a creditor.
5. Anti-avoidance rules remain HMRC’s backstop. The court noted that HMRC retains separate tools to challenge abusive use of acquired tax losses, including the “major change in the nature or conduct of trade” rules in Part 14 of the Corporation Tax Act 2010, targeted anti-avoidance rules, and the GAAR. Acquirers of loss-rich businesses must take tax advice on the deductibility of those losses post-acquisition, independent of whether the restructuring plan itself was lawfully sanctioned.
6. An appeal remains possible. The judge expressly left open several questions: what happens if the court finds HMRC is in fact worse off; the boundary between terminal and rescue plans; and whether the court can impose modified plan terms. Freshfields’ analysis notes that HMRC may seek permission to appeal, potentially direct to the Supreme Court. Treat the current judgment as authoritative but monitor for any appellate development.
The Bigger Picture: HMRC as Involuntary Creditor
Waldorf is part of a broader recalibration of HMRC’s role in corporate insolvency and restructuring. The rise of Part 26A since 2020 has created a flexible restructuring tool that can bind all creditor classes — including HMRC — in ways that CVAs and administrations cannot. The Tax Journal’s analysis of HMRC’s constitutional status under Part 26A is a useful primer on why HMRC finds these proceedings structurally uncomfortable. As an involuntary creditor — one that cannot choose its debtors — HMRC has legitimate interests that courts must weigh seriously. But those interests do not translate into a power of veto.
For CFOs advising boards on distressed strategy, the message from Waldorf is clear: if genuine engagement occurs, the plan is economically fair, and the no-worse-off test is met, the courts will sanction a restructuring even over HMRC’s objection. That is a significant addition to the toolkit for managing HMRC debt in a distressed context — and a powerful incentive to structure any restructuring plan with the rigour this judgment demands.