Summary: We will not investigate this complaint about the Council’s decision not to pay interest on a council tax refund or compensation. This is because there is insufficient evidence of fault by the Council to warrant an investigation.

The complaint

1. The complainant, whom I refer to as Mr X, complains the Council will not pay interest or compensation even though it charged him too much council tax from 1993.

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The Ombudsman’s role and powers

2. 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’. We provide a free service, but must use public money carefully. We may decide not to start an investigation if we believe it is unlikely we would find fault. (Local Government Act 1974, section 24A(6), as amended)
3. We investigate complaints about councils and certain other bodies. We cannot investigate the actions of the Valuation Office Agency (VOA). (Local Government Act 1974, sections 25 and 34A, as amended)

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How I considered this complaint

4. I read the complaint and the Council’s response. I invited Mr X to comment on a draft of this decision.

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What I found

Council tax bands

5. The VOA decides which council tax band a property should be in. The VOA is not part of the council. If someone thinks their home is in the wrong band they can ask for a re-evaluation. The VOA can decide to increase or decrease someone’s banding. If the VOA changes the band it tells the council and the council issues a revised bill. If the band has increased the council issues a demand for arrears. The law prevents a council from asking for interest on the arrears. If the banding is decreased the council provides a refund. The law does not say a council should pay interest on the refund.
6. The VOA decides the rateable value for properties for business rates. If it reduces the rateable value then the council issues a refund. The law says the council must pay interest payable at 1% below the Bank of England base rate.

What happened

7. Mr X’s council tax band was recently reduced from 1993. The Council issued a refund of £7726. Mr X asked for interest on the refund or compensation.
8. The Council refused the request. The Council explained the banding decision was made by the VOA and the regulations do not provide for interest to be paid on refunds. The Council said it was not responsible for the original banding decision.

Assessment

9. There is insufficient evidence of fault by the Council to warrant an investigation. Government guidance recommends councils pay refunds going back to 1993, if applicable. But, there is no legislation, or guidance, which says a council must pay interest on a refund, or compensation. Conversely, councils are prevented from charging interest on arrears and the law says councils must pay interest on refunds for some business rates. It is reasonable to expect that if Parliament had intended councils to pay interest on council tax refunds then it would have included this in the regulations. But, there is no such requirement.
10. It was the VOA that made the original banding decision and the VOA is not part of the Council. The Council had no choice but to bill Mr X based on the banding decision made by the VOA. I cannot investigate the decision made by the VOA because it is not part of the Council.
11. Mr X disagrees with the Council’s decision. But, we do not act as an appeal body and cannot intervene just because a council makes a decision that someone disagrees with.

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Final decision

12. There is insufficient evidence of fault by the Council to warrant an investigation.

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Investigator's decision on behalf of the Ombudsman