Summary: Ms X complained the Council applied Council Tax to an annex on her house despite the annex being exempt. Ms X complained the Council sent the Council Tax charges to debt collection agencies causing additional debt collection charges. The Council has admitted fault for charging Council Tax and has refunded Ms X the overpayments she made. The Ombudsman found the Council was at fault for charging council tax despite having the relevant information to know the property was exempt and the subsequent debt collection activity. The Council agreed to the Ombudsman recommendations to refunds any debt collection charges and provide Ms X with an apology and £900 for the avoidable distress, frustration and financial hardship it caused.

The complaint

1. Ms X complained the Council applied Council Tax to an annex on her house despite the annex being exempt.
2. Ms X complained the Council sent the Council Tax charges to debt collection agencies causing additional debt collection charges.
3. The Council has admitted fault for charging Council Tax and has refunded Ms X the overpayments but not the payments she made to debt collection agencies.

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The Ombudsman’s role and powers

4. We investigate complaints about ‘maladministration’ and ‘service failure’. In this statement, I have used the word fault to refer to these. We must also consider whether any fault has had an adverse impact on the person making the complaint. I refer to this as ‘injustice’. If there has been fault which has caused an injustice, we may suggest a remedy. (Local Government Act 1974, sections 26(1) and 26A(1), as amended)
5. If we are satisfied with a council’s actions or proposed actions, we can complete our investigation and issue a decision statement. (Local Government Act 1974, section 30(1B) and 34H(i), as amended)

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How I considered this complaint

6. I have considered all the information Ms X provided. I have also asked the Council questions and requested information, and in turn have considered the Council’s response.
7. Ms X provided comments on my draft decision. I considered Ms X’s comments before making my final decision.

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What I found

Council Tax

8. The Council Tax (Exempt Dwellings) order 1992 (as amended) allows properties to be exempt from council tax where an annex is empty and cannot be let separately from the main dwelling without a breach of planning control under Section 171A of the Town and Country Planning Act 1990.
9. The Council Tax (Administration and Enforcement) Regulations 1992 SI 613 covers both the way councils collect payments of council tax and the way councils can recover council tax debt.
10. Recovery action can take many different forms. The Council may instruct bailiffs to recover the debt by arranging payments or goods can be seized and sold to pay off the debt. In rare cases where a person has ‘wilfully refused’ to pay their council tax bill the Council can apply to have someone committed to prison.

Ombudsman guidance on remedies

11. We expect bodies in jurisdiction to treat people fairly and with respect, and not to expose the public to unnecessary distress, harm or risk as a result of their actions or inactions. Such injustice cannot generally be remedied by a payment, so we usually seek a symbolic amount to acknowledge the impact of fault on the complainant. The amount depends on the circumstances of the case.
12. When we assess distress, we consider the complainant’s individual circumstances (such as their state of health and age). In reaching a view on remedy we will consider all the circumstances including:
• The severity of the distress.
• The length of time involved.
• The number of people affected (for example, members of the complainant’s family as well as the complainant).
• Whether the person affected is vulnerable and affected by distress more severely than most people.
• Any relevant professional opinion about the effects on any individual.
13. A remedy payment for distress is often a moderate sum of between £100 and £300. In cases where the distress was severe or prolonged, up to £1,000 may be justified. Exceptionally, we may recommend more than this.

Background

14. The Council granted planning permission for Ms X’s property to build a “granny flat”, hereby referred to as an annex, at the property in 1984. This planning permission included the condition that the development should not be occupied except by a dependent relative of one of the members of the household occupying the existing dwelling.
15. From April 2012 to the end of March 2016, a relative of Ms X lived in the annex. Ms X and her relative paid Council Tax for the annex while the relative resided in the property.

What happened

16. Ms X attended the Council on 27 January 2016 to advise her relative was moving out of the annex. Ms X gave the Council a copy of the planning permission showing the annex could not be tenanted by a non-family member and advised the annex would be vacant after her relative left. The Council told Ms X to approach the Valuation Tribunal to get the property re-classified.
17. The Council produced a final bill for Ms X’s relative’s Council Tax account in April 2016. Ms X contacted the Council on 12 April 2016 to get this final bill amended to 31 March 2016. The Council made the amendments and changed the payment method to monthly moving forwards for Ms X. Ms X now had an account for her main property (Account 1) and an account for the annex (Account 2).
18. Ms X contacted the Council in September 2016 to query the payments made as these were showing on the wrong accounts. The Council transferred payments to Account 1 from Account 2. The Council sent Ms X a “Council Tax Survey Form” to return.
19. The Council began debt collection activity for unpaid charges on Account 2.
20. Ms X complained to the Council on 14 November 2016 about being charged council tax on two properties. Ms X said the Valuation Office would not merge the two properties. Ms X reiterated she could not tenant the annex due to the planning conditions.
21. Ms X complained again on 7 February 2017 and again advised the annex was unoccupied.
22. The Council continued to send standard debt collection letters to Ms X chasing for payment for the money owed on Account 2. The Council also arranged an attachment of earnings order and liability order for the debt owed.
23. Ms X contacted her MP about the issues she was experiencing with council tax. Ms X’s MP passed her concern to the Department for Communities and Local Government who responded to Ms X to advise about exemption rules that may apply to her property.
24. Ms X did not approach the Council with this information.
25. Ms X continued to pay council tax towards Account 1 and Account 2. However, since the payments were insufficient, the Council continued to send debt chaser letters and arrange for debt collection agencies to chase the debt on both accounts.
26. Ms X contacted her MP again on 16 February 2019 who contacted the Council.
27. The Council attended Ms X’s property on 7 March 2019 in response to contact from the MP. The Council officer confirmed Ms X’s annex was unoccupied and had been since March 2016. The Council officer advised the Council Ms X’s annex was exempt from council tax.
28. The Council advised Ms X’s MP on 8 March 2019 the annex was unoccupied, an exemption applied and that it would provide a refund to Ms X for overpaid council tax.
29. The Council said Ms X had paid £1,466.54 for council tax charges for the annex since March 2016. In March 2019, the Council transferred a credit of £1,271.24 to Account 1, followed by a further credit of £18 on 28 March 2019. The Council retained £177.80 of Ms X’s payments for debt collection fees to third party agencies.
30. The Council produced a council tax bill for Account 1 on 8 May 2019 for the year April 2019 to March 2020 showing the transfer of the above credit and a starting credit on Ms X’s account of £450.96 for this financial year, prior to the council tax charges for the forthcoming year.
31. On 28 August 2019, Ms X asked the Council for an explanation or breakdown of her council tax accounts to verify the Council had provided the correct refund. Ms X’s councillor also contacted the Council to ask for a revised breakdown of the council tax accounts.
32. The Council provided a breakdown on 30 August 2019 of Account 1 but did not reference the charges and payments for Account 2.
33. Ms X complained that this did not fulfil her request on 4 September 2019. Ms X also asked for confirmation the Council had lifted the County Court Judgement (CCJ) in relation to the debt and requested both an apology and compensation from the Council.
34. The Council apologised to Ms X on 5 September 2019 for providing the incorrect breakdown, promised to provide a revised breakdown and arranged an appointment for 19 September 2019 to discuss this.
35. The Council provided a revised breakdown to Ms X on 13 September 2019.
36. The Council provided a formal response to Ms X’s complaint on 30 September 2019. The Council said:
• It had responded to Ms X’s MP on 8 March 2019 and advised Ms X to contact her MP about why the response was not passed on.
• Ms X did not confirm what type of dwelling the annex was from April 2016 to March 2019 by filling out a Council Tax Survey Form and it was therefore correct to charge council tax.
• It had now refunded Ms X payments to the annex account and considered the matter resolved.
37. Ms X brought her complaint to the Ombudsman.

Analysis

Council Tax and Debt Collection - Annex

38. Ms X complained the Council charged council tax on her annex despite this property being exempt from Council tax.
39. The Council has accepted Ms X’s annex was exempt from council tax and it was at fault for charging Ms X. The Council has taken appropriate action to transfers Ms X’s council tax overpayments of £1,289.24 to her main council tax account.
40. While the Council has accepted it needed to refund Ms X’s overpayments for her council tax, it has advised it was not at fault for raising the charges in the first instance. The Council said Ms X did not return the relevant Council Tax Survey form so was unaware that Ms X’s property was exempt from council tax. Because of this, the Council retained £177.80 of Ms X’s payments to cover third party debt collection charges.
41. The Council is entitled to chase a resident for unpaid council tax through various methods including standard council letters, third party debt collection agencies or court orders. If a valid debt is owed to the Council and it exercises these powers, it is unlikely the Ombudsman would find fault.
42. While the Council considered Ms X owed a valid debt for her council tax, the reality was that her property was exempt. Had Ms X not provided any information to the Council or communicated with the Council about the exemption, Ms X would have directly caused the debt collection activity and her own injustice.
43. However, Ms X made the Council aware of the relevant planning permissions attached to the annex in January 2016. The Council has accepted Ms X provided this evidence to it. Ms X also confirmed to the Council on 12 April 2016 her relative moved out of the property on 31 March 2016 and the annex was unoccupied. The Council also accepted this information by setting up an account in Ms X’s name from 1 April 2016.
44. The Council had all the evidence it needed from 12 April 2016 that Ms X’s annex was exempt from council tax.
45. The Council has argued Ms X did not return the relevant form to it. There is nothing wrong with the Council using a form, such as the Council Tax Survey form, to collect relevant information from a resident. Rejecting or ignoring valid evidence and comments from a resident simply because a form is not returned is fault.
46. Should the Council have needed to verify this information it could have done so at any point. The Council has shown on 7 March 2019 that it did not need the return of the Council Tax Survey form as it confirmed the property was exempt by sending a Council officer to the property instead.
47. Since the Council had all the information it needed prior to starting debt collection activity, it is not appropriate for Ms X to incur the debt collection charges. The Council should transfer the remaining £177.80 of Ms X’s payments onto the council tax account for her main residence.

Council Tax and Debt Collection – Main Residence

48. Ms X experienced financial difficulty due to the Council requesting payment for council tax on both her main residence and on the annex. Ms X fell behind on payment for both council tax accounts. As a result, the Council took debt collection activity on both accounts.
49. Ms X does not dispute she should pay council tax for her main residence but still fell behind on payment for this account. As above, the Council is entitled to carry out debt collection activities when a valid debt is owed.
50. However, once the Council rectified its error and transferred the total credit of £1,289.24, for the council tax overpayments on the annex, to Ms X’s council tax account for her main residence this removed any debt owed on this account. In fact, prior to charges the Council would collect over the forthcoming financial year, Ms X’s council tax was in credit by £450.96.
51. It is hard to conclude that Ms X would have fallen behind in payment on the council tax for her main residence had she not been for paying council tax on two properties. The Council’s fault in charging for the annex has directly caused Ms X to encounter financial difficulties and fall behind in payment. This in turn caused the Council to chase Ms X through its debt collection process. The Council should ensure it refunds any debt collection charges applied to Ms X’s main residence account from 1 April 2016 to 8 May 2019, if it has applied these.
52. Should Ms X have fallen behind in payment after 8 May 2019, this is not through the fault of the Council outlined in this decision.

Injustice Caused by Council Fault

53. Ms X contacted the Council in January 2016, April 2016, September 2016, November 2016 and February 2017 to advise the Council her annex should be exempt from council tax. The Council charged Ms X council tax on the annex until March 2019 and carried out debt collection activity in 2016, 2017, 2018 and 2019.
54. Both the Council and Ms X have provided me with numerous debt collection letters from both the Council and third-party debt collection agencies. Both the Council and Ms X have also demonstrated court summons, debt collection visits (including seizure of goods) and court orders all relating to a debt that would not have existed if not for the fault of the Council.
55. As a result of the Council’s fault and its subsequent debt collection activities, Ms X has experienced avoidable financial difficulties, distress and frustration for a period for three years.
56. Additionally, despite Ms X’s various contacts in 2016 and 2017 it took the Council until 7 March 2019 to visit Ms X’s property. The Council only took this action once Ms X’s MP contacted it to raise concerns. Only acting in response to an MP’s contact rather than a resident’s contact about a matter is fault. A resident is entitled to receive the same, appropriate, response to a complaint that an MP would receive when making it on behalf of a resident.
57. This fault caused avoidable delays to the resolution of Ms X’s complaint and will undoubtedly have caused Ms X frustration that the Council listened to her MP on the first contact despite failing to listen to her for three years.

Agreed action

58. Within one month of the Ombudsman’s final decision the Council will:
• Transfer the remaining £177.80 of Ms X’s payments to the annex council tax account onto the council tax account for Ms X’s main residence.
• Refund any debt collection charges applied to Ms X’s main residence account applied from 1 April 2016 to 8 May 2019, if applicable.
• Apologise and pay Ms X a goodwill gesture of £900 for the severe and prolonged distress, frustration and financial hardship it caused by charging council tax on an exempt property for three years and the relating debt collection activity.

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Final decision

59. There was fault by the Council. As the Council has agreed to my recommendations I have completed my investigation.

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Investigator's decision on behalf of the Ombudsman