Article courtesy of Tom Bannister, Justine Erickson, and Thomas Hill (Akin Gump)
The position of His Majesty’s Revenue and Customs (“HMRC“) in the English law insolvency and restructuring framework has been a point of interest for practitioners over the years, as the promotion of a ‘rescue culture’ (as reflected in England’s insolvency and company laws) could be seen to run counter to HMRC’s focus on timely collection of taxes. This article focuses on HMRC’s rights in respect of restructuring plans under Part 26A of the Companies Act 2006 (“Part 26A RPs”), which have become a popular tool for company restructurings since its introduction in 2020. HMRC’s role in Part 26A RPs is not expressly set out in the relevant statute, and much is therefore left to the interpretation of the courts. As tax liabilities frequently feature in restructuring cases, HMRC has had to play an increasingly active role in these cases to seek to protect its interests.
While it is notable that HMRC is often an involuntary creditor in restructuring scenarios, and courts have regard to HMRC’s critical public function as the collector of taxes, it appears that recent case law would suggest that the treatment of HMRC under Part 26A RPs is largely akin to that of other creditors. Indeed, HMRC is subject to the same statutory gateway (the ‘no-worse off’ test) and the same discretionary fairness inquiry that governs every other dissenting class. The recurring judicial vocabulary of “caution”, “unique status”, and the “considerable weight” to be given to its views may form part of this discretionary analysis, but does not exempt HMRC from providing robust support for any opposition to a Part 26A plan. On closer reading, the outcomes principally turn not on HMRC’s identity but on the quality of the plan, the adequacy of the evidence, the fairness of the allocation of the restructuring surplus, and the degree of engagement between the parties.
I. A Single Impartial Statutory Framework
Part 26A of the Companies Act 2006 (“Part 26A”) prescribes the test for the exercise of the cross-class cram-down power, namely that the court may bind a dissenting class only if satisfied that:
- none of the members of the dissenting class would be any worse off under the plan than they would be in the event of the relevant alternative; and
- at least one “in the money” class has approved the plan.
It should be noted that nothing in this test specifies any particular special treatment for HMRC.
Michael Green J in Re Waldorf Production UK Plc [2026] EWHC 1014 (Ch) (“Waldorf 2”) held that “there is no jurisdictional bar to the court exercising its cross-class cramdown power against HMRC, even where HMRC has rationally decided to oppose a plan”.(1) Michael Green J reasoned that any contrary conclusion would grant HMRC an effective veto which could not have been the legislative intent and would be inconsistent with the broader rescue culture embodied in Part 26A and insolvency law.(2)
II. A Uniform Application of the ‘No-Worse Off’ Test
The impartiality of the legislative framework with respect to HMRC’s position as a creditor is reinforced by the courts’ approach to the satisfaction of the ‘no-worse off’ test. In Waldorf 2, following the Court of Appeal in Re Petrofac Ltd [2025] EWHC 1250 (Ch) (“Petrofac”), Green J confined the section 901G(3) question to “creditors’ existing rights as a creditor that are being compromised by the plan”.(3) HMRC’s most recent argument, namely that the test should capture the wider impact of Harbour Energy’s future use of the group’s ring-fenced tax losses (publicly valued at around US$900 million of shielding), was rejected because those losses “are not part of the existing rights that are being compromised by the Plan and therefore I do not think they are relevant to the no worse off condition”. In essence, HMRC was held to the same measure of compromisable loss as any other creditor, rather than being afforded special status by virtue of its constitutional mandate and purpose.
III. A History of Unsuccessful Objections
If HMRC’s views carried special weight, one would expect to see many examples of HMRC’s objection being fatal throughout recent case law. However, the existing body of case law shows largely the opposite: on three separate occasions, the court has exercised its discretion to cram HMRC down in Re Houst Ltd [2022] EWHC 1941 (Ch) (“Houst”), Re Prezzo Investco Ltd [2023] EWHC 1679 (Ch) (“Prezzo”) and Waldorf 2.
In Houst, the first plan to cram HMRC, HMRC voted against the plan because it relinquished its preferential priority in favour of unsecured creditors, but it neither provided valuation evidence nor attended the sanction hearing in support of its objection. Zacaroli J sanctioned the plan, describing HMRC as “a sophisticated creditor able to look after its own interests” that had not “sought […] to negotiate an alternative deal”.(4) In Prezzo, the court held that HMRC’s status does not fetter the court’s discretion to cram HMRC where the court is satisfied the plan is fair, and noted that “to the extent it was being suggested that the court should not, as a matter of principle, entertain sanction without the discharge of, or proper provision for, HMRC preferential liabilities incurred during the Plan process, there is no warrant for me to make such a finding”.(5)
IV. A Closer Look at HMRC’s Successful Objections
It is worth noting that some cases have refused to cram HMRC and have made reference to its ‘special status’. Indeed, the courts refused to sanction the proposed plans in Re Nasmyth Group Ltd [2023] EWHC 988 (Ch) (“Nasmyth”), Re Great Annual Savings Company Ltd [2023] EWHC 1026 (Ch) (“Great Annual Savings”) and Re Waldorf Production UK plc [2025] EWHC 2181 (Ch) (“Waldorf 1”). More specifically, it should be noted that:
- Leech J in Nasmyth stated that the court “should scrutinise the Plan with care and should not cram down the HMRC unless there are good reasons to do so”;(6)
- Adam Johnson J in Great Annual Savings stated that “given its critical public function as the collector of taxes, I think HMRC’s views deserve considerable weight”.(7) Waldorf 2, despite rejecting HMRC’s objection, expressly endorsed the approach in Nasmyth, directing that HMRC’s views be given “considerable weight” as an involuntary creditor.(8)
On the face of the courts’ dictum, it could be argued that HMRC’s position should be granted preferential consideration. However, any such preferential consideration does not appear to have materially influenced the court’s decisions in these cases.
Institutional or rationality privilege? First, the weight of HMRC’s position attaches to reasoned dissent rather than automatically to HMRC’s institutional identity. In Waldorf 2 the court could see “the decision that HMRC rationally has come to and the reasons for it should be accorded great weight”.(9) There is no specific institutional privilege here. Instead, the court could be seen to be following the ordinary principle that it gives weight to a creditor’s reasoned commercial opposition. Following Petrofac and Re Thames Water Utilities Holdings Ltd [2025] EWHC 338 (Ch) (“Thames Water”), the court now affords weight to the reasoned objections of all creditors, including out-of-the-money classes. Consideration of HMRC’s reasoned views affords HMRC the same treatment as other creditors.
Rejected constitutional status. Second, the courts have expressly rejected that HMRC’s status alters the legal test. Leech J in Nasmyth stated that “the Court should not refuse to sanction a restructuring plan under Part 26A as a matter of principle because HMRC will be crammed down if the plan is sanctioned”.(10) That statement of neutrality is echoed in Waldorf 2.(11) HMRC’s presence as an objecting creditor is not, of itself, a reason to withhold sanction.
Successful HMRC objections. Third, where HMRC has successfully opposed Part 26A RPs, it succeeded on grounds available to any creditor. In Great Annual Savings, the plan failed because the company could not prove the “no worse off” test. In Nasmyth, the plan failed due to a condition requiring separate time-to-pay arrangements to be agreed between the company and HMRC (which plan conditionality was found to be an unacceptable roadblock to sanction). Finally, in Waldorf 1, the plan failed because of the overall unfairness of the restructuring benefit to out-of-the-money creditors. The courts would seem to have reached the same conclusion in each instance irrespective of whether the objecting creditor was HMRC.
V. Waldorf 2 – HMRC’s Position Laid Bare
Waldorf 2 was the most definitive decision with respect to cramming HMRC on tax loss grounds and the first instance of HMRC being crammed since the Adler / Thames Water / Petrofac trilogy. HMRC deployed its most ambitious attempt at opposing a Part 26A RP to date, consisting of (i) a jurisdictional “constitutional mandate” argument, (ii) a “no worse off” argument based on foregone future tax revenues, and (iii) an abuse-of-process argument that the plan was being used to extinguish c.US$94 million of Energy Profits Levy liabilities so that a solvent buyer could harvest US$900 million of tax shielding. The court rejected all of HMRC’s arguments.
Notably, the core points arising from Waldorf 2 are:
1. No Preferential Status. The court noted that although it could “perhaps be seen as hard-nosed to treat HMRC like any other unsecured creditor that is not essential to pay in order to keep the business going”, “that is the reality and Parliament has not granted it any preferential status in relation to Part 26A plans”.(12)
2. Fairness. Michael Green J expressed that “I do not think that it is strictly necessary to define the preservation of the tax losses as a “contribution” by HMRC to the restructuring benefits”, but that “I do not see why the tax losses in this case should not be considered a “benefit preserved or generated by the restructuring””.(13) Accordingly, although these could be considered in the context of a ‘fair allocation of the restructuring benefits’ analysis, HMRC’s argument was not persuasive in these circumstances. The court noted that HMRC could not object to a plan that involved the transfer and use of tax losses, unless it was otherwise a plan creditor for some other unrelated tax liability.(14)
3. Engagement from HMRC. The court criticized HMRC’s “unhelpful” refusal to attend the October 2025 mediation,(15) and declined HMRC’s invitation to require the parties to renegotiate or impose HMRC’s alternative contingent payment proposal (as this could jeopardize the broader commercial compromise reached among the parties, which would be highly prejudicial to all other stakeholders).
The lesson from Waldorf 2 is that HMRC’s leverage is bound by the same fairness and ‘no-worse off’ analysis as applies to other creditors, and the court’s ability to cram HMRC is not hindered by its institutional status.
For completeness, it is important to note that HMRC’s enhanced ranking in the insolvency waterfall for certain debts only affects a plan sanction analysis to the extent that it may affect where HMRC sits in the priority order and therefore what it would recover in an insolvent relevant alternative.
The legislative framework, taken alongside its application by the courts, supports the conclusion that English courts apply an impartial framework to the sanction of Part 26A RPs, and that there is no jurisdictional bar to exercising cross-class cram-down against HMRC where warranted. HMRC is generally a substantial creditor and is due consideration from the court in that capacity. Although the court may consider its unique position and public function as tax collector, Waldorf 2 makes clear that HMRC has not been afforded any special status under the relevant legislation, and it will generally be held to the same standard as any other creditor. Michael Green J went on to note in Waldorf 2 that he does not expect this will ‘open the floodgates’ to Part 26A being used to extinguish unwanted tax liabilities in any circumstance, as a company seeking to cram down HMRC will still have to satisfy all jurisdictional hurdles and demonstrate the fairness of its plan. We expect practitioners will continue to watch these developments with interest.
(1) 130.
(2) Ibid.
(3) 159.
(4) 42-43.
(5) 75
(6) 116.
(7) 138.
(8) 136.
(9) Ibid.
(10) 114
(11) 136
(12) 227.
(13) 221
(14) 222.
(15) 71.
