Summary: There was fault in how the Council considered whether the complainant’s music business was eligible for the expanded retail discount. It misinterpreted Government guidance about tutoring, and also did not consider whether other aspects of the business meant it should be classified as ‘retail’. The Council has agreed to review its decision with regard to these points, and also to offer the complainant a financial remedy for his time and trouble.

The complaint

1. I will refer to the complainant as Mr H.
2. Mr H complains the Council has reclassified his music business as ‘non-retail’, because it involves tutoring. This means the business lost its entitlement to relief from business rates, and is now faced with bills it is unable to sustain.

Back to top

The Ombudsman’s role and powers

3. 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)
4. This complaint involves events that occurred during the COVID-19 pandemic. The Government introduced a range of new and frequently updated rules and guidance during this time. We can consider whether the Council followed the relevant legislation, guidance and our published “Good Administrative Practice during the response to COVID-19”.

Back to top

How I considered this complaint

5. I reviewed the correspondence between Mr H and the Council.
6. I also shared a draft copy of this decision with each party for their comments.

Back to top

What I found

7. The following chronology will detail the key events and correspondence relevant to this complaint. For the sake of brevity, I will not seek to describe the full detail of correspondence between Mr H and the Council.
8. Mr H operates a music business from a premises in the Council’s area. He says the business provides both music tuition, and also sells music products from the premises.
9. In 2018 the Government announced a business rates discount for qualifying retail businesses, for tax years 2019/20 and 2020/21. At that point, the Council agreed Mr H’s business qualified for the discount and applied it to his business rates account.
10. However, in March 2020, the Council reversed this decision. It said this was because it now understood Mr H’s business was tutoring, which was specifically excluded from the definition of ‘retail’ in the Government guidance on the discount.
11. After the announcement of the first COVID-19 lockdown, the Government decided to expand the discount, providing 100% rates relief for qualifying businesses for 2020/21. In April, it issued new guidance on the application of the expanded retail discount (ERD), under which ‘tutoring’ was removed from the list of excluded business types.
12. Mr H had submitted a complaint to the Council on 27 March. The Council responded on 8 April. It said it had reviewed Mr H’s application for retail relief in line with the legislation, and had sought advice from the Government, but his business was not classified as ‘retail’.
13. The Council said it had incorrectly awarded retail relief for 2019/20, but said it would not retrospectively withdraw this relief. However, it had withdrawn Mr H’s relief for 2020/21. It also said Mr H’s premises’ rateable value was too high to receive small business rates relief.
14. The Council noted Mr H had submitted an application for discretionary hardship relief, and that it was currently waiting for him to provide the evidence necessary for it to process this application.
15. Mr H responded the next day. He pointed out that, under the new guidance, ‘tutoring’ was no longer excluded. He also described the services the business provided in more detail, including the provision of musical instruments and books to customers.
16. In a subsequent email on 16 April, Mr H explained he would not need to pursue the hardship relief application, if the Council accepted the business was retail. He said the business also sold products related to music, including computer software and hardware and music books.
17. The Council emailed Mr H again on 21 April. It said it had not received the evidence it needed for his hardship relief application, and so it had closed it. The Council said it had reviewed several times its decision about his retail status, but said:

“You are aware that ‘tuition’ was initially included in the list of professions, however it was intentionally removed and there is no suggestion at this stage that the Government will reverse this decision.”

18. On 14 July, Mr H submitted a complaint to the Ombudsman. At that point we considered the matter premature, as it had not been addressed fully through the Council’s complaints process.
19. Mr H exchanged further correspondence with the Council and other relevant parties. On 28 January 2021, the Council wrote a formal letter to him. It noted Mr H had asked the Council to inspect his premises “to establish [his] retail status”, and acknowledged it had been unable to complete this because of the impact of the pandemic. However, the Council said an inspection would not alter the fact Mr H’s business was music tuition, and that this was excluded under the ERD guidance.
20. Mr H contacted the Ombudsman again on 26 March. After making initial enquiries with the Council, it confirmed on 30 April it could not add to its previous responses to Mr H. We therefore accepted Mr H’s complaint for investigation.

Back to top

Legislative background

Retail discount

21. In October 2018, the Government announced that qualifying businesses would receive a 33% discount from their business rates for tax years 2019/20 and 2020/21. The accompanying guidance explained that, to qualify, the relevant business premises must “be occupied hereditaments with a rateable value of less than £51,000, that are wholly or mainly being used as shops, restaurants, cafes and drinking establishments”.
22. At paragraph 14, the guidance said:

“The list below sets out the types of uses that the Government does not consider to be retail use for the purpose of this relief. Again, it is for local authorities to determine for themselves whether particular properties are broadly similar in nature to those below and, if so, to consider them not eligible for the relief under their local scheme.”

23. This list included ‘tutors’.
24. In April 2020, the Government issued revised guidance for the new expanded retail discount (ERD) scheme. Among the changes were that qualifying businesses would now receive 100% rates relief for 2020/21, and that there was no longer a cap on the rateable value of a business for it to qualify.
25. The new scheme still required businesses to fall into the ‘retail’ category. However, ‘tutors’ had now been removed from the list of excluded businesses.
26. At paragraph 15, the revised guidance said:

“The list set out above is not intended to be exhaustive as it would be impossible to list the many and varied uses that exist within the qualifying purposes. There will also be mixed uses. However, it is intended to be a guide for authorities as to the types of uses that the Government considers for this purpose to be eligible for relief. Authorities should determine for themselves whether particular properties not listed are broadly similar in nature to those above and, if so, to consider them eligible for the relief. Conversely, properties that are not broadly similar in nature to those listed above should not be eligible for the relief.”

27. A virtually identical provision appeared in the guidance to the original scheme, at paragraph 13.

Retail, hospitality and leisure grant

28. In March 2020, the government created schemes for councils to pay grants to small businesses and retail, hospitality and leisure (RHL) businesses. This was because the COVID-19 restrictions affected so many of them. A business’s right to a grant depends on its rateable value on the business rating list and its eligibility for certain business rate reliefs on 11 March 2020.
29. To be eligible for the RHL grant, the business’s premises must have a rateable value of under £51,000, and to be in receipt of the ERD.

Back to top

Analysis

30. The Council considers it wrongly decided Mr H’s business was eligible for the original retail relief scheme, and should not have discounted his rates for 2019/20. This is because it is a tutoring business, which the scheme’s guidance explicitly excluded from the ‘retail’ category.
31. I note the Council has not retrospectively sought to recover the unpaid business rates from Mr H, because it considers it was responsible for the error. This is positive.
32. However, I remain concerned about this decision. This is because Mr H has explained that the business does not only provide tutoring, but also sells music products to customers from its premises. While it is correct the original guidance listed ‘tutors’ under the excluded categories, the eligible categories of business included ‘shops’ of a range of descriptions.
33. For Mr H’s business to have qualified for relief under this category, it would be necessary to show that the ‘shop’ element constituted its ‘whole or main’ purpose. I am conscious Mr H has generally referred to his business as ‘tuition’ throughout the course of his complaint, and so, on balance, I accept it appears unlikely he could now reasonably present an argument it was wholly or mainly a shop.
34. Even accepting this, the Council still had a duty to consider Mr H’s representations, and (if it did not accept them) provide reasons for its decision. But I see no such consideration in the Council’s various correspondence with Mr H – the only substantive reason it has provided for refusing relief is that tutors are excluded from the guidance.
35. I find fault for this reason. I will consider whether this fault caused Mr H an injustice presently.
36. Since the new ERD scheme and revised guidance were introduced in April 2020, the Council has maintained its decision to refuse relief to Mr H’s business. It says this is because tutors remain excluded from the retail category.
37. But this is demonstrably incorrect. Among other changes made to the eligibility criteria in the revised guidance, tutors were removed from the list of excluded businesses.
38. I do note there is also no mention of tutors in the ‘included’ businesses, and so the guidance does not explicitly direct councils to treat them as eligible either. However, the implication of the change is that it is now open to councils to grant relief to tutors, where they consider it appropriate.
39. The Ombudsman’s role is to review how councils have made their decisions. If a council has followed the correct procedure, taken account of all relevant information, and given clear and logical reasons for their decision, we generally cannot criticise it. We do not make operational or policy decisions on councils’ behalf, or provide a right of appeal against contested decisions, and we cannot uphold a complaint simply because a person disagrees with something a council has done.
40. Even under the revised guidance, therefore, it remains the Council’s decision whether to grant relief to Mr H’s business. I cannot make my own decision about this. But, again, the Council has a duty to properly consider Mr H’s eligibility, with an accurate understanding of the Government guidance. Its reliance on the outdated guidance means it is now fettering its discretion, which is fault.
41. I will now turn to the injustice these faults have caused Mr H.
42. As I have said, although the Council was initially correct to say tuition was in the excluded categories, it should still have considered whether Mr H’s businesses still qualified for relief in its ‘shop’ role; although I acknowledge the case for it to still be treated as retail, under the original guidance, is not strong.
43. I am also conscious Mr H did not have to pay any additional backdated rates for 2019/20, even after the Council’s decision to remove the relief, and so there is no injustice to him in this respect.
44. However, the Council has made a significant error with respect to the revised scheme. It had a duty to consider whether Mr H’s business was eligible to receive the ERD, bearing in mind the tuition aspect was no longer excluded, and also bearing in mind the ‘shop’ aspect of the business. Its failure to do this creates an injustice to Mr H, because it means he may not have benefitted from rates relief to which he was entitled.
45. In addition to this, the eligibility criteria for the RHL grant are, first, that a business’s premises have a rateable value under £51,000, and second, that it be in receipt of the ERD.
46. Mr H has confirmed his premises’ rateable value is £16,000. If the Council had granted the ERD, therefore, it appears he may also have been entitled to a grant under the RHL scheme. That he may have missed out on the grant therefore represents a further injustice to him.
47. To remedy this injustice, I consider the Council should now review Mr H’s case, with reference to the April 2020 ERD guidance (I note the Government has more recently released further revised guidance, but the Council should apply the guidance in place at the material time, which was mid-2020). In the interests of objectivity, the review should be undertaken by an officer or officers not previously involved in the case. Once the review is complete, the Council should write to Mr H to explain the outcome.
48. And, if the decision is that Mr H should have been granted the ERD, the Council should now apply this retrospectively to his business rates bills. The Council should then also consider whether Mr H was eligible for a grant under the RHL scheme, and pay this to him, if it decides so.
49. I also note the lengths Mr H went to in corresponding with the Council, and other parties, in pursuit of his complaint. Although the substantive outcome may have been the same, given the Council’s fault here, and the fact Mr H pointed it out (without effect), I consider he was put to unnecessary time and trouble. The Council should also offer a remedy for this.

Back to top

Agreed action

50. Within one month of the date of my final decision, the Council has agreed to:

• review Mr H’s case in line with the expanded retail discount guidance from April 2020. The officer or officer(s) undertaking the review will not have previously been involved in the case;
• write to Mr H to explain the outcome of the review;
• if the outcome of the review is that Mr H’s businesses should have received the ERD, the Council will now apply it in retrospect. It will also then consider whether the business was eligible for an RHL grant, and pay Mr H an equivalent amount, if so; and
• offer Mr H £150 to reflect his time and trouble pursuing the complaint.

Back to top

Final decision

51. I have completed my investigation with a finding of fault causing injustice.

Back to top

Investigator's decision on behalf of the Ombudsman