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Stockton-on-Tees Borough Council (20 005 365)

Category : Benefits and tax > COVID-19

Decision : Not upheld

Decision date : 01 Jun 2021

The Ombudsman's final decision:

Summary: Mrs X complained the Council refused COVID-19 business grant assistance, which added to the financial hardship her business suffered as a result of the pandemic. The Council was not at fault.

The complaint

  1. Mrs X complained the Council refused COVID-19 business grant assistance, after she applied for a small business grant and a discretionary grant. This added to the financial hardship her business suffered as a result of the pandemic.

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The Ombudsman’s role and powers

  1. We investigate complaints about ‘maladministration’ and ‘service failure’. In this statement, I have used the word ‘fault’ to refer to these. 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)
  2. We cannot question whether a council’s decision is right or wrong simply because the complainant disagrees with it. We must consider whether there was fault in the way the decision was reached. (Local Government Act 1974, section 34(3), as amended)
  3. 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”.

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How I considered this complaint

  1. I considered the information provided by Mrs X and the Council.
  2. Mrs X and the Council had an opportunity to comment on two draft decisions and I considered any comments received before making a final decision.

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What I found


  1. In response to the COVID-19 pandemic the Government introduced support for businesses, including the small business grant fund and a discretionary grant fund.

Small business grant

  1. Businesses which, on 11 March 2020, received Small Business Rates Relief (“SBRR”) were able to apply for a payment of £10,000.
  2. Funding was payable to the person recorded as the ratepayer in respect of the business on 11 March 2020. However, where it was factually clear to the council on 11 March 2020 that the rating list was inaccurate on that date, it had discretion to award the grant based on their view of who would have been entitled to it.

Valuation Office Agency

  1. The Valuation Office Agency (VOA) provides valuations and property advice to support taxation and benefits to the government and local authorities. It compiles and maintains lists detailing the rateable value of 1.9 million commercial properties for business rates.
  2. says your business rates could change if:
    • you move or make changes to your premises;
    • the nature of your business changes;
    • you sublet part of your property; or
    • you merge two or more properties into one.
  3. You must report any changes to the VOA to ensure you are paying the right amount.
  4. Councils will not amend their ratings list until instructed to do so by the VOA.

Discretionary grants

  1. In May 2020 the Government published “Local Authorities Discretionary Grants Fund- guidance for local authorities”. This allowed councils to pay discretionary grants of £25,000, £10,000 or any sum under £10,000 to businesses which could not access other grant funding (other than the Job Retention Scheme). The value of the payment was at the council’s discretion. Businesses claiming the grant had to meet the following eligibility criteria:
    • occupy a property, or part of a property, with a rateable value or mortgage payments of under £51,000;
    • have relatively high fixed property costs;
    • have suffered a significant fall in income due to COVID-19; and
    • be trading on 11 March 2020.
  2. The funding was aimed at:
    • small and micro businesses;
    • businesses with relatively high fixed property costs;
    • businesses that have suffered a significant fall in income due to COVID-19; and
    • businesses which occupy a property, or part of a property, with a rateable value or mortgage payments of under £51,000.
  3. As a guide, the Government said the following types of business should be a priority for funding:
    • small businesses in shared offices or other flexible workspaces;
    • regular market traders with fixed building costs, such as rent, who do not have their own business rates assessment;
    • bed & Breakfasts which pay Council Tax instead of business rates; and
    • certain charity properties.

However, councils could decide whether a business was similar and, if so, whether it was eligible for grants.

  1. Government guidance said, councils may want to consider the following when deciding on the amount of the grant:
    • the level of fixed costs faced by the business;
    • the number of employees;
    • whether businesses have had to close completely and cannot trade online; and
    • the consequent scale of impact of COVID-19 losses.
  2. Councils were asked to set out their discretionary grant scheme on their website, providing clear guidance on which types of business were prioritised, and how they would decide on the level of grant.

Government FAQ for councils

  1. The Government published FAQs for councils on its guidance. This says:

“Businesses based in a residential dwelling may take fixed property costs to include their house mortgages etc. Could support be given to these businesses?

It is up to Local Authorities to determine what kind of businesses they wish to support through this scheme. Tax and insurance details should identify the separate costs of a home-based business. Local Authorities should take steps to understand the specific costs of the business.”

  1. “Is there scope to provide grants to businesses without premises costs?

There is discretion for Local Authorities to pay out to businesses who do not meet the criteria the funds are primarily and predominantly designed to support and Local Authorities must decide what is right to support their local economies. However, as this funding is primarily aimed at businesses with high ongoing fixed property-related costs we expect the majority of grants to go to businesses with premises costs”.

  1. Do Local Authorities have to include all four of the priority groups (Shared spaces, market traders, bed & breakfasts and charities) or can they pick which to prioritise these or other businesses?

The funding provided may not cover these groups and other businesses in need in the area. This fund is designed to primarily and predominantly support small and micro businesses, while allowing Local Authorities to exercise their local knowledge and discretion on what particular needs exist within their area. The above list, presented in para 24 of the guidance, provides some priority groups that were not eligible for the Small Business Grants Fund or Retail, Hospitality and Leisure Fund and which Government is asking Local Authorities to prioritise for this scheme”.

This Council’s discretionary grant policy

  1. The Council’s scheme had three phases.

In phase 1, which was open until 15 June 2020, eligible businesses were:

    • small businesses in shared spaces in a commercial property;
    • market traders with fixed property costs;
    • bed and breakfast properties listed for council tax instead of business rates; and
    • charities, which would meet the criteria for small business rate relief or rural rate relief but were not in receipt of charitable relief.
  1. To be eligible the business must also:
    • have been trading on 11 March 2020;
    • be small, with fewer than 50 employees;
    • have relatively high ongoing fixed property-related costs;
    • be able to demonstrate that they had a significant drop in income due to COVID-19 restriction measures;
    • have certain ongoing property costs. To be considered for a grant of £5,000 the business must have ongoing property costs of at least £200 per month (£2,400 to £7,200 per year); for a grant of £10,000 the ongoing property costs must be over £600 per month (over £7,200 per year); and
    • complete an online application and provide relevant evidence.
  2. In phase 2, which was open until 12 July 2020, the scheme was extended to include the following:
    • private nurseries that are eligible for the Nursery Discount but who were not eligible for support under the Small Business Grants Fund or Retail, Hospitality and Leisure Grants Fund;
    • small manufacturing businesses with small retail outlets within the property that sell to the public;
    • businesses involved in supplying goods to the Retail Hospitality and Leisure Industry but who were ineligible for support from other grant schemes as they did not retail to the public; and
    • not for profit organisations with a rateable value in excess of £51,000 where the main purpose is for Retail, Hospitality and Leisure.
  3. In phase 3, which was open until 2 August 2020, the scheme was extended to the following:
    • small manufacturing businesses, held in the rating list with a rateable value of less than 51,000; for the purpose of this grant a manufacturing business is described as any business that uses raw materials, parts, and components to assemble finished goods; and
    • businesses eligible for Expanded Retail Discount with a rateable value of between 51,000 and 100,000.

Principles of good administrative practice

  1. The Ombudsman publishes a guidance document setting out the standards we expect from bodies in jurisdiction. We issued an addendum in response to the COVID-19 pandemic; “Good Administrative Practice during the response to Covid-19”. The following points are relevant in this case.
    • Basic record keeping is vital during crisis working. There should always be a clear audit trail of how and why decisions were made.
    • The basis on which decisions are made and resources allocated, even under emergency conditions, should be open and transparent.
    • Decision reasons should be clear, evidence based and where necessary explained in the particular context and circumstances of that decision.
    • If you use new or revised policies and processes this should not lead to arbitrary decisions and actions. Ensure you have a clear framework for fair and consistent decision making and operational delivery.

What happened

  1. Mrs X rented business premises in another council area until early 2020 when she started operating her business from an extension to her home. She said this was built specifically for the business, funded by a loan that she had to repay at £640 per month.
  2. Mrs X said she called the other council about her business rates. It told her to contact this Council as she was now working from home in this Council’s area. Mrs X said she called this Council in January 2020 and was advised she did not need to pay business rates as she was working from home. She said she called again in March, at which point she was told to contact the Valuation Office Agency (VOA) if she wanted the extension treated as a commercial property.
  3. The Council has no record of Mrs X calling it in January or March 2020. It provided a copy of an email Mrs X sent it on 1 August asking whether she would be eligible for a small business grant. In the email she said:
    • she had called the other council and had been advised she no longer needed to pay business rates;
    • she had accepted this advice and not pursued the matter further but on reflection she was not sure her situation had been properly understood; and
    • she now thought she had been misadvised and that she did need to register for business rates.
  4. Mrs X applied to the VOA in August 2020.
  5. Also on 1 August 2020, Mrs X applied for a discretionary grant. The Council considered the application and wrote to her on 11 August 2020, refusing the grant. It said she did not meet the criteria because she was working from home and not occupying shared space with another business.
  6. In September 2020, Mrs X asked the Council to review its decision that she was not eligible for a small business grant (SBG). Her MP also contacted the Council about this. The Council reviewed its decision. It wrote to Mrs X on 22 September 2020 to explain she was not eligible for a small business grant because her business was not on its rating list on 11 March 2020 and not eligible for SBRR on that date. It did not review the discretionary grant decision or mention this in its email.
  7. Mrs X contacted her MP again and in January 2021 the MP asked the Council to reconsider the small business grant application on the grounds that the VOA were assessing the extension as a commercial property from March 2020 and had since added it to the ratings list backdated to January 2020. The Council reviewed the decision but again refused to award a small business grant. It explained that it did not have discretion to award a grant to a ratepayer who was not on the ratings list on 11 March 2020 because it was not aware at the time that the property had a commercial use and therefore that its rating list was inaccurate. It only became aware of this in August 2020. The discretionary grant application was not referred to in the correspondence in January 2021.
  8. In response to our enquiries, the Council provided a record of its decision-making when it adopted its discretionary grants scheme. This does not show whether or how it considered the impact of excluding home-based businesses from its scheme.
  9. Also in response to my enquiries, the Council explained it had excluded home-based businesses from its discretionary scheme in line with Government guidance to support businesses with fixed property-related costs. It considered business rent, business rates and business mortgages were the greatest such costs and the impact on home based businesses with the costs of premises was not as great as the impact on businesses with premises.
  10. In response to an earlier draft decision, the Council added it understood the category under which Mrs X applied – “small businesses in shared offices or other flexible workspaces” – applied to business premises only. It said it understood this because the examples for that category set out in the Guidance were all types of business premises. Further, it said it was advised, in an online briefing by the sponsoring Government department, that it was not the Government’s intention that this category would apply to home based businesses. It has provided a copy of its notes from that briefing. Therefore, it did not consider it needed to justify excluding home based businesses from that category in its decision record when devising its discretionary scheme.
  11. In relation to Mrs X’s application, the Council said the planning application in 2018 made no mention of the intention to use the property for commercial purposes. In addition, its scheme required evidence of property costs including rent, rates or business mortgage payments but Mrs X had not provided evidence of such costs.

My findings

Small business grant

  1. Mrs X did not formally apply for a small business grant, she merely made an enquiry about whether she might be eligible. The Council decided she was not eligible because the property was not on its ratings list on 11 March 2020 and it was not aware in March 2020 that its list was inaccurate.
  2. Although Mrs X said she sought advice from the Council in January and March about registering part of her property for business rates, the Council has no record of this. Her email dated 1 August 2020 suggests she had previously only contacted the other council so it may be that her recollection of when she contacted this Council was incorrect. Mrs X did not apply to the VOA until August 2020 and there is no other evidence to show the Council was aware that part of the property was being used for a business before 1 August 2020. On the limited evidence available, I cannot say on a balance of probabilities the Council gave incorrect advice.
  3. I am satisfied the Council’s decision was correct and there is no evidence of fault in its decision making.

Discretionary grant

  1. The Council refused Mrs X’s discretionary grant application on 11 August 2020. It said she did not meet the scheme criteria because she was:
    • working from home;
    • not occupying a shared spaced with another business; and
    • did not have fixed property-related costs for her business.
  2. Mrs X asked the Council to review its decision to refuse the small business grant. There is no mention in the correspondence about that of any concerns about the discretionary grant and the Council said it did not receive a request to review that decision. Although Mrs X said she wanted the Council to review both decisions, there was nothing in her communications to indicate she was unhappy with the discretionary grant decision. Therefore, I cannot criticise it for not reviewing it.
  3. The Government gave councils wide discretion when designing their discretionary schemes. This means the Council had wide discretion to prioritise or exclude certain businesses. However, it had to follow a proper decision making process in doing so.
  4. Government guidance allowed councils to award a discretionary grant to home-based businesses and suggested how property costs could be considered where the business did not pay business rates (see paragraph 19 above). Government therefore expressly envisaged there would be circumstances where home-based businesses, paying council tax, could be eligible for the grants. However, the guidance was not explicit about whether this applied to all the categories it asked councils to prioritise.
  5. I recognise that following the Government announcement of funding for discretionary grant schemes, the Council had little time to prepare its scheme and, if it had had longer to prepare, its scheme and its decision-making records may have been more detailed. I am mindful the Council’s scheme was largely in line with Government guidance, and it did have some records of how it decided its scheme. I also note its published scheme was clear that small businesses in shared offices or other flexible workspaces would only be eligible if based in a commercial property.
  6. That said, I would still have expected the Council to record its reasons for excluding home based businesses, including which categories they were excluded from. The Council’s decision-making record does not include any reference to how it considered home based businesses. However, taking into account all the circumstances, I do not consider this this meets the threshold for a finding of fault.
  7. The Council refused Mrs X’s application for a grant because her business was based at a residential address. This decision was in line with the Council’s published scheme and therefore it was not at fault.

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Final decision

I have completed my investigation. I have not found fault.

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Investigator's decision on behalf of the Ombudsman

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