I tried several different options and plugins to try and fix this I even tried resorting to using a plugin to allow SMTP to send the notifications but none of them worked.

I then read this thread over on the WordPress support forums and on page 4, thanks to teknics there is a fix that worked instantly for me. Just a simple addition to my .htaccess file was all that was needed, if you alread have a .htaccess in place please be careful not to mess up anything else in the file as it could prevent your site from working.
Just adding the following line to the end of the .htaccess file was all that was needed:

php_value mail.force_extra_parameters '-f webmaster@example.com'

I have checked the earlier email notifications I received before it all stopped working and my return path was listed as apache@iomart.com (where iomart are my host, aka Easyspace), after adding the line above to my .htaccess file my return path is now showing as webmaster@example.com and notifications are working ok. I’ve since it to be my actual email address of my account I use for my WordPress profile to keep things tidy and all is working well.

UPDATE - Several wordpress updates later and I stopped receiving notifications again and couldn’t figure out why. In Googling the problem I came across my own bloody blog entry and after removing the line above from my .htaccess file it all works again. So if you added the line above to your .htaccess file REMOVE IT if you’ve updated your WordPress installation.

I’m not sure why this works exactly but if you can shed any light on why forcing an extra parameter suddenly gets things working please do so in a comment below.