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

The complaint

1. The complainant, whom I refer to as Mr X, says the Council should pay interest on a council tax refund after his property was placed in a lower council tax band.

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The Ombudsman’s role and powers

2. The Ombudsman investigates complaints about ‘maladministration’ and ‘service failure’, which we call ‘fault’. We must also consider whether any fault has had an adverse impact on the person making the complaint, which we call ‘injustice’. We provide a free service, but must use public money carefully. We do not start an investigation if we decide there is not enough evidence of fault to justify investigating. (Local Government Act 1974, section 24A(6))
3. We investigate complaints about councils and certain other bodies. We cannot investigate the actions of bodies such as 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 considered information provided by Mr X and the Council. This includes the complaint correspondence. I also considered our Assessment Code and comments Mr X made in reply to a draft of this decision.

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My assessment

5. The VOA, which is not part of the Council, decides which council tax band a property should be in. The Council cannot increase or decrease a council tax band and cannot set the band. The Council must charge council tax based on the banding decision made by the VOA.
6. If someone thinks their home is in the wrong band they can ask for a re-evaluation. The VOA can then decide to increase or decrease the 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 councils 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.
7. The VOA also decides the rateable value for properties for business rates. If it reduces the rateable value the Council issues a refund. The law says the Council must pay interest payable at 1% below the Bank of England base rate.
8. In May 2022 the VOA reduced Mr X’s property band from 1993. It notified the Council of the reduction in the banding. The Council issued a new council tax bill and a refund for the overpaid council tax from 1993.
9. Mr X asked the Council to pay compound interest of 8% on the refund. The Council declined. The Council explained there had been no error on its part and there is no legal requirement for it to pay interest.
10. I will not start an investigation because there is insufficient evidence of fault by the Council. 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. Conversely, councils are prevented from charging interest on arrears but must pay interest on refunds for some business rates. It is reasonable to expect that if the government 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.
11. Mr X disagrees with the Council’s decision and says the Council has a moral duty to pay interest. We are not an appeal body and cannot intervene just because a council makes a decision that someone disagrees with. We could not ask the Council to pay interest because it has not done anything wrong and there is no requirement for it to pay interest.
12. There was no fault by the Council in relation to the banding because the band is set by the VOA and the Council must charge council tax based on the VOA banding decision. I cannot investigate the banding decisions made by the VOA because it is not part of the Council.

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Final decision

13. We will not investigate this complaint because there is insufficient evidence of fault by the Council.

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Investigator's decision on behalf of the Ombudsman