Landmark High Court Decision on Secretary of State Fees in Bankruptcy Annulment Cases

Leeds-based law firm Shulmans has just won a landmark High Court decision on Secretary of State fees in bankruptcy annulment cases.

In the case of Safier v. Wardell and Others [2017] EWHC 20 (Ch), in a reserved judgment handed down on 13th January 2017, His Honour Judge Behrens held that monies paid by a third party to avoid bankruptcy, do not require additional tax to be paid to the Secretary of State.

In this instance, the bankrupt person solely owned a property with substantial equity. The bankrupt’s brother stepped in and agreed to pay the debts and expenses to prevent the property being repossessed. A claim was made that tax should be paid on these debts, an additional £7,000. The judge agreed that the funds were not part of the bankrupt’s estate and therefore no tax was payable.

Mark Wilkinson, Head of Insolvency and Credit Management Services at Shulmans, who was assisted on this case by associate solicitor Lucy Clark said: “The Safier decision is really important because it changes the options and affordability of helping someone facing bankruptcy. In previous cases, debtors and third parties have simply paid the fees to resolve matters. This judgement would set a precedent meaning more people can avoid paying tax when offering to help others out. A number of cases have been on hold pending this latest judgment.

Mr Wilkinson continued: “This decision provides welcome clarification on the point for practitioners and bankrupt people alike, however, that the decision is likely to be subject to an appeal.”