High Court approves Waldorf plan over HMRC objections

The High Court has sanctioned the second restructuring plan proposed by Waldorf Production UK Plc, allowing the North Sea producer to compromise approximately US$94 million in unpaid windfall tax liabilities owed to HMRC as part of a broader sale to Harbour Energy plc, in a closely watched decision on the treatment of tax authorities under the UK’s restructuring plan regime.

In a 5 May 2026 judgment, Mr Justice Michael Green approved the plan notwithstanding HMRC’s opposition, using the cross-class cram down power under Part 26A of the Companies Act 2006 to bind the tax authority after finding that HMRC would be no worse off under the plan than in the relevant alternative of insolvency proceedings. The ruling follows the company’s failed first restructuring plan in 2025, which had been refused sanction by Mr Justice Hildyard after the Court found inadequate engagement with unsecured creditors.

The revised plan was built around a binding agreement under which a subsidiary of Harbour Energy agreed to acquire most of the Waldorf group for US$205 million less leakage, with Harbour allocating US$85 million of consideration to Waldorf Production UK. Harbour made clear that completion was conditional on the compromise and extinguishment of various liabilities, including the company’s Energy Profits Levy obligations to HMRC.

The dispute centred on the interaction between the restructuring plan and approximately US$4.5 billion in accumulated UK ring fence tax losses within the wider group, which Harbour intended to acquire and use to shield future profits from tax, estimating that the losses could potentially reduce Harbour's future tax liabilities by around US$924 million. HMRC argued that the restructuring improperly allowed Harbour to obtain a substantial tax advantage while extinguishing the company’s outstanding tax liabilities at a 14% recovery. HMRC contended that the plan amounted to an abuse of process and that the Court should not sanction a restructuring designed principally to eliminate tax debt for the benefit of a solvent purchaser capable of paying it in full.

The Court rejected those arguments. Justice Green held that there was no jurisdictional bar preventing HMRC from being crammed down under Part 26A, despite the tax authority’s constitutional role in collecting taxes. While acknowledging that HMRC occupies a unique position as an involuntary creditor and that its objections deserved “the greatest of respect and weight,” the judge concluded that Parliament had not granted HMRC any effective veto over restructuring plans.

Justice Green stated: “I am in little doubt that there is no jurisdictional bar to the court exercising its cross-class cram down power against HMRC, even where HMRC has rationally decided to oppose a plan. If it were otherwise, HMRC would have an effective veto against restructuring plans and I do not see that that could possibly have been the legislative intent behind the introduction of Part 26A; nor would it be consistent with the rescue culture embodied within this area of law and current company and insolvency law generally.”

A central issue was whether the “no worse off” analysis under section 901G should take account of the broader fiscal effect of Harbour’s future use of the tax losses. HMRC argued that the Exchequer would suffer materially reduced future tax receipts if the plan succeeded. Relying heavily on the Court of Appeal’s decision in Petrofac, Justice Green held that the statutory test focuses on the value of the creditor’s compromised rights under the plan compared with the relevant alternative, rather than wider economic or fiscal consequences outside the plan itself.

Even if the broader tax consequences were relevant, the judge found on the evidence that HMRC would not in fact be worse off overall under the plan. Expert evidence showed that the assumption Harbour could fully utilise both existing tax losses and future decommissioning-related tax reliefs was unrealistic. Once more realistic utilisation assumptions were applied, the Exchequer was likely to be better off under the restructuring than in an insolvency scenario.

The judgment also addressed broader fairness concerns following the Court of Appeal’s recent trilogy of restructuring plan decisions in Adler, Thames Water and Petrofac. Justice Green accepted that the preservation of valuable tax losses formed part of the benefits generated by the restructuring and was relevant to assessing fairness. However, he concluded that HMRC was still being treated fairly under the heavily negotiated compromise reached among stakeholders, particularly given that the only other unsecured creditor, Capricorn Energy, supported the plan and would receive the same 14% recovery.

The Court was critical of aspects of the company’s historical conduct, including a US$76 million dividend paid shortly after the introduction of the Energy Profits Levy and the company’s decision to continue trading while failing to pay tax liabilities. Nevertheless, Justice Green concluded those issues did not justify refusing sanction where the plan represented the only realistic transaction capable of delivering a materially better outcome for creditors than insolvency proceedings.

Read the decision here.

Professionals involved:

• Daniel Bayfield KC and Charlotte Cooke of South Square (instructed by White & Case) for Waldorf

• Matthew Abraham of South Square (instructed by Milbank) for the Bond Trustee and SteerCo

• Mark Phillips KC of South Square, Stefan Ramel of Guildhall Chambers and Samuel Parsons of Erskine Chambers (instructed by HMRC Legal Group) for HMRC