A fraudulent umbrella company's liquidators have failed to claw back more than £257,000 from two NHS consultant doctors who were paid without proper tax deductions - because the doctors had already declared everything to HMRC themselves.

The High Court dismissed both routes the liquidators tried in Re Fulmar Contracting Ltd (in liquidation) [2026] EWHC 2322 (Ch), handed down on September 9, 2026. The decision offers a detailed roadmap for how self-assessment by workers can defeat a transaction-at-undervalue claim - a question that matters directly to insolvency practitioners and the professional indemnity insurers behind them.

Fulmar Contracting Ltd was incorporated in March 2021 and wound up by September 2023, after HMRC presented a winding-up petition. The company had failed to pay very significant sums of PAYE, national insurance contributions, and VAT. It operated as an umbrella company, sitting between an employment agency and NHS workers. Its job was straightforward: employ the workers, deduct payroll taxes, pass them to HMRC, and pay the workers what was left. Instead, it paid the workers gross and pocketed the difference - or, more precisely, the people behind the fraud did.

The two respondents - both consultant doctors - were supplied with locum work through an agency called Fresh Medical. One was paid approximately £392,500 between September 2021 and May 2023, with part of that sum going to a company under her control rather than to her directly. The other received about £271,200 between August 2021 and July 2022. There is no evidence that the company deducted PAYE or national insurance from those payments, though one doctor's pay was reduced for a period in a way that may have involved deductions of some kind.

The liquidators pursued two claims. The first was contractual: they relied on a clause in what they said were the doctors' employment contracts, requiring repayment of any overpayments arising from the company's failure to deduct tax. On their calculations, the two doctors had been overpaid by roughly £155,400 and £102,000 respectively.

The court found the employment contracts were never actually agreed to. The documents had been signed via DocuSign on the company's side, but the doctors' names were simply typed in - no ink signature, no DocuSign authentication mark for them. The doctors said they never saw the contracts, and the court accepted that evidence. Fresh Medical, the employment agency that provided copies to the liquidators, confirmed the contracts were obtained purely for its own internal compliance and were never sent to the doctors. The contracts themselves were riddled with errors: a key defined term - "Services" - was left blank, and the pay rate was set at the national minimum wage despite the doctors being paid at consultant rates.

The court also rejected the argument that the doctors became employees by conduct, finding no evidence of supervision, direction, or control - the common law hallmarks of an employment relationship - and nothing to suggest a clause like the repayment provision would have formed part of any informal arrangement.

The second claim was under section 238 of the Insolvency Act 1986, which allows liquidators to recover value lost through transactions at an undervalue. The argument was that by paying gross without deducting tax, the company gave the doctors more than they were entitled to receive, while simultaneously landing itself with a tax bill it could never pay. The extra amount the doctors received - the tax that should have been withheld - was the undervalue.

This is where the case broke new ground. The liquidators relied on Purkiss v Kennedy [2024] EWHC 1081 (Ch), where gross payments by an umbrella company to its employees were held at first instance to be transactions at an undervalue. The claims in that case ultimately failed on other grounds, and the Court of Appeal did not revisit the undervalue finding. But the court in Fulmar drew a sharper factual distinction: in Purkiss, the workers never declared the money to HMRC at all. Here, both doctors had filed self-assessment returns accounting for everything they received. One doctor's declared self-employment income comfortably exceeded what she received from the company. The other's returns, combined with the corporation tax filings of a company she controlled, covered the full amount.

The court held that by declaring the payments and making themselves liable for the tax, the doctors effectively eliminated the undervalue. HMRC had accepted the self-assessment returns without challenge. Allowing the liquidators to recover again would amount to double taxation of the same income - something the court said was inconsistent with both the self-assessment regime and the statutory purpose of section 238, which exists to reverse gratuitous depletions of an insolvent company's assets.

The liquidators had offered a concession: they would give credit for tax the doctors had actually paid. But the court said the concession was too narrow. It should have extended to all income the doctors had declared to HMRC, not just the tax already handed over. The difference mattered because self-employed taxpayers can legitimately claim expenses and allowances that reduce the tax payable on the same gross income. The court refused to let the liquidators pick apart the doctors' tax returns to challenge those deductions, finding the exercise incapable of proving anything relevant to the proceedings.

Even if it was wrong on all of that, the court added, it would have granted no remedy. The doctors were honest taxpayers who accounted for what they received. Had the company actually deducted tax properly, it almost certainly would not have passed the money on to HMRC anyway - that was the whole point of the fraud. HMRC's position as a creditor was arguably better, not worse, because the doctors had done the right thing.

The judgment carries a careful caveat. Other workers paid by the company - or by similar umbrella companies - may still face valid claims. Each case turns on its own facts, and the court stressed that its decision does not resolve anything beyond the two claims before it.

For professional indemnity and D&O insurers, the decision maps out when a self-assessment defence can neutralise a transaction-at-undervalue claim - and when it cannot, where workers have not declared the income or HMRC has challenged the returns.

The parties were directed to agree a consequential order. The period for seeking permission to appeal runs from the date of that order.