From 1983 Penhaligon headed the Liberal by-election unit which planned the campaigns in individual seats. At the Liberal Assembly in September 1984 he was chosen as President-elect of the Liberal Party (the first sitting MP to be elected to the post), and served as Party President from 1985 to 1986. This carried with it the job of presiding over the Liberal Assembly at the end of his term, which saw a party split over defence policy and whether to support nuclear weapons; Penhaligon did not intervene, something he regretted afterwards.