On 5 July 2023 the Court sanctioned Prezzo Investco Ltd's (Prezzo) restructuring plan despite strong opposition by UK tax authority, HMRC.  

HMRC has taken a more active approach to opposing restructuring plans and was successful in blocking the plans recently proposed by GAS and Nasmyth (see our alert). 

By contrast in Prezzo, the Court decided that the allocation of benefits under the plan was fair and exercised its discretion to cram down HMRC.

Key takeaways 

• Although the Court reiterated a need for caution when cramming down HMRC as an 'involuntary creditor', the Court did not consider this a bar to its discretion. 

• The payment to be provided to HMRC under the plan meant it would receive most of the 'restructuring surplus' and more than it would be paid in the relevant alternative: administration.

• Various factors, including a company's record of making and keeping to 'time-to-pay' arrangements with HMRC and the length of time its debt has been accruing, will be considered by the Court.

• It is not a necessary precondition to the success of a plan for the company to pay its tax liabilities falling due while the plan is being proposed even if it is paying certain other critical creditors in full. 

• More generally, restructuring plans do not need to provide consideration to compromise 'out of the money' creditors.

What's next? 

HMRC recently consented to Fitness First's restructuring plan. This was expected as HMRC is being paid in full but it is encouraging that HMRC will support restructuring plans depending on the circumstances. The decision in Prezzo may also see HMRC reviewing its approach to active opposition in some cases. 

Re Prezzo Investco Ltd [2023] EWHC 1679 (Ch)
Re Fitness First Clubs Ltd [2023] EWHC 1699 (Ch)

Find out more

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