English tax authority changes approach to restructuring plans

Two restructuring plan hearings in quick succession have seen the English tax authority, HMRC, get proactively involved in the negotiation of the plans. It secured an improved position for itself, and gave active support for the plans at sanction hearings, marking a change from its previous approach.

Enzen

An engineering consultancy for the water industry sought approval for a restructuring plan as an alternative to an administration.

HMRC (which would receive nothing in an administration) agreed to release its claims for a payment of £700,000 (negotiated up from £500,000).

The judge noted that HMRC's more favourable position under the plan reflected both its status as a preferential creditor and its commercial leverage, due to its ongoing relationship as trading continues.

While three classes of creditor voted against the plan, it was sanctioned by the court (using its powers of cross-class cram down) as these creditors would be "no worse off" under the plan than in the alternative.

OutsideClinic 

A few days later another plan under Part 26A was heard in relation to a company that offered at home optometry services (OutsideClinic Limited) and was similarly unable to pay its debts to HMRC.

In this instance, HMRC was able to negotiate itself an additional payment under the plan, representing 10 pence in the pound over that which other unsecured creditors would receive.

The company's ultimate owners proposed to invest new capital into the structure to ensure the additional HMRC payment would not compromise the position of the unsecured creditors.

Six out of seven creditors voted in favour, with one abstaining, and the court sanctioned the plan.

Key takeaways

HMRC's new proactive approach has been welcomed by the court (contrast this to its previous approach in the Nasmyth and Gas plans discussed here). This could make restructuring plans a viable option for more companies, however, the risk of challenge and the high cost of court proceedings remain an obstacle for all but the largest companies.     

Find out more

To discuss the issues raised in this article in more detail, please contact a member of our Restructuring and Insolvency team.

Re Enzen Global Limited and Enzen Limited [2025] EWHC 852 (Ch)

Re OutsideClinic Limited [2025] EWHC 875 (Ch)