Costs Issues When Bankruptcy Order Annulled Pursuant To Section 282(1)(a) Insolvency Act 1986

• Published date: 04 August 2023
• Law Firm: Michelmores
• Author: Lucy Atkinson

Re Adjei v Official Receiver [2023]

Introduction

This case considered the costs implications arising from the annulment, pursuant to section 282(1)(a)Insolvency Act 1986 (the Act), of a bankruptcy order made on the petition of HMRC on the basis that the order ought not to have been made.

Background

A taxpayer was made bankrupt at a hearing in her absence in January 2021 on a petition presented by HMRC in the sum of '115,862.23. This sum related almost entirely of amounts HMRC claimed were due from the taxpayer as an employer and partner in a medical practice, with the remaining '2,064.65 claimed in respect of late filing penalties and interest on the basis that the taxpayer purportedly earned more than '50,000 and was liable to file self-assessment returns. The taxpayer was, however, a PAYE employee (whose role including dealing with PAYE), who earned less than '50,000 per annum and who was not under an obligation to file self-assessment returns.

In April 2021 the taxpayer applied for an annulment pursuant to section 282(1)(a) of the Act and for an order pursuant to rule 10.135 of the Insolvency Rules 2016 for a stay of an appointment of any trustee in bankruptcy other than the official receiver pending the outcome of the annulment application.

In July 2021 the taxpayer sent a letter to the self-assessment, debt management, and insolvency claims handling units at HMRC with documents in support of an appeal of the sums claimed in the petition. In response, HMRC stated wrongly that only the First-tier Tribunal (Tax Chamber) (FTT) could consider the appeal. In March 2022 the appeal was returned by the FTT. HMRC also failed to provide the demands and assessments on which...