In the hope that this might help someone else, I researched and found a solution here:
http://www.howyoudo.info/index.php/how-to-fix-windows-server-upload-file-inherit-permissions-error/
In short, change the permissions of the upload_tmp_dir folder (path in the php.ini file) according to the permissions of your web application folder.
If you cannot or do not want to change permissions in the temp folder (by default, this is the systemβs temporary folder). Then create a new temporary folder and set the required permission for it. Then update the PHP INI upload_tmp_dir value to point to this directory.
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