In Debra Elizabeth Adjei v Official Receiver and HMRC EWCA 1572 [2023] (Admin), the High Court annulled a bankruptcy order against an employee due to unpaid PAYE and NICs. She proved that she was merely the employee operating the payroll and not the employer as HMRC had falsely alleged.

Debra Adjei worked for a medical practice.

  • She was an employee and not a partner in the practice. Her role involved dealing with the practice PAYE which she had taken over from a former colleague who had failed to deal with it properly resulting in arrears. She was not self-employed and earned less than £50,000.
  • In February 2020 HMRC issued a bankruptcy petition against her for £115,682.23 on the basis that she was responsible for the practice PAYE arrears. The amount included £2,065 in self-employment late filing penalties and interest.
  • No Regulation 80 PAYE assessment or Section 8 NIC decisions were made be HMRC.
  • In March and November 2020 Ms Adjei informed HMRC by email that she was employed on PAYE and not self-employed.
  • In early 2021 a bankruptcy order was made in her absence. Her evidence stated that she was not given dial-in details for the remote hearing which the High Court Judge accepted as true. She made an annulment application in April 2021 stating again that she was never a partner or employer in the practice and was a PAYE employee taxed in the usual way.
  • HMRC’s first witness statement in June 2021, from an HMRC officer, Mr Doyle, asserted that she was an employer and that no partnership was in place. No evidence was produced to support these assertions.
  • Ms Adjei contacted HMRC on multiple occasions, personally and through an adviser, seeking to appeal the sums claimed by HMRC and sending evidence of her position, including a copy of the partnership deed, her contract of employment, and copies of her P60s from 2015 to 2021.
  • HMRC advised that only the First Tier Tribunal (FTT) could consider the appeal. The FTT returned the appeal as they could not find an appealable decision.
  • Various correspondence and witness statements followed over the next year with documents having to be resent, as HMRC claimed they had not received them, several changes in the HMRC officer dealing with the case, HMRC responses which dealt only with the interest and penalties and not the more than £100,000 in PAYE and NICs, muddled witness statements and an attempt to introduce a High-Income Child Benefit Charge (HICBC) of £5,393.
  • By the time of the March 2023 bankruptcy hearing HMRC’s position had changed; they did not oppose the annulment application, challenging only who should bear the costs of the petition and accepting that the £5,000 bankruptcy threshold was not met despite the HICBC slightly exceeding this.

The High Court annulled the bankruptcy order stating that it was not well-founded or properly made and that HMRC was wrong to pursue it. The judge called the written evidence of Mr Doyle 'disingenuous' and in some areas, “simply untrue”. She noted that Ms Adjei may have struggled to get her position across initially but said that this was not relevant given that HMRC did not put forward any legitimate or persuasive basis for ever concluding that Ms Adjei was personally liable for the PAYE debts.

The meaning of her emails was sufficiently clear to have alerted HMRC to the possibility that there had been a mistake.

The judge declined in making a costs order, meaning that each party had to pay their own costs for the petition and annulment application. She did order HMRC to pay the costs of the Official Receiver and trustees' costs. It would appear however that whilst HMRC applied for Ms Adjei to pay their costs the same was not true in reverse meaning that the court could not hold HMRC liable for her costs.


We are featuring this case due to our total incredulity at HMRC's actions in making an innocent taxpayer bankrupt. HMRC needs to consider how come a wholly unsupported claim for PAYE and NICs could lead to the near bankruptcy of an individual, resulting in her bearing court costs and adviser fees, not to mention three years of worry, simply because she operated her employer’s payroll. To add insult to injury, more than two years after the original bankruptcy petition, HMRC tried to raise a High-Income Child Benefit charge when they knew that her earnings were and always had been, below the £50,000 threshold for the charge. The absence of checks and balances within HMRC’s systems is alarming and it is to be hoped that lessons are learned from this.

The taxpayer does have further options for redress: she can take her complaints to HMRC's Adjudicator who can deal with costs and compensation.

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Recovery of PAYE: Regulation 80 and 72 assessments for PAYE
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External link

Debra Elizabeth Adjei v Official Receiver and HMRC EWCA 1572 [2023] (Admin)


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