Summary: Mr X complained the Council wrongly refused his applications for COVID-19 grant funding causing him financial hardship. The Council did not explain to Mr X that he needed to provide evidence not only of trading but also the date he was in rateable occupation of the premises. We have made recommendations to remedy the injustice caused to Mr X by this fault.

The complaint

1. Mr X complained the Council wrongly refused his applications for COVID-19 business grant funding.
2. Mr X says this caused financial hardship.

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The Ombudsman’s role and powers

3. We investigate complaints of injustice caused by ‘maladministration’ and ‘service failure’. I have used the word ‘fault’ to refer to these. 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)
4. 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. As part of the investigation, I have:
• considered the complaint and the documents provided by the complainant;
• made enquiries of the Council and considered the comments and documents the Council provided;
• discussed the issues with the complainant;
• sent my draft decision to both the Council and the complainant and invited their comments. Neither Mr X or the Council made any comments in response to my draft decision.

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What I found

Retail, Hospitality and Leisure Grants

7. In March 2020, in response to the COVID-19 pandemic, the government created schemes for councils to pay grants to small businesses. Relevant to this complaint it created Retail, Hospitality and Leisure grants (RHLG) targeted at those sectors.

COVID-19 discretionary grants

8. In May 2020, the Government introduced a discretionary grant scheme administered by local authorities. It published guidance on such schemes contained in: “Local Authorities discretionary Grants Fund- guidance for local authorities”.
9. Under the scheme, councils could award a discretionary grant 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 Council had discretion over the amount of payment in each case.

Local Restrictions Support Grants

10. From 5 November to 2 December 2020 the government introduced this grant (LRSG) to provide support to businesses mandated to close following the imposition of national restrictions. Funding was made by Local Authorities on a 28-day payment cycle for as long as the national restrictions applied.
11. Businesses must have been trading the day before national restrictions came into force to be eligible to receive funding under this scheme. A business was considered to be trading if it was engaged in business activity. The guidance said this should be interpreted as carrying on a trade or profession, or buying and selling goods or services in order to generate turnover.
12. There was further guidance on what could be defined as trading for the purposes of the grant scheme. This included;

• Staff on furlough
• The business continued to trade online, via click and collect service etc
• The business was engaged in business activity: managing accounts, preparing for reopening, planning and implementing COVID-safe measures

13. This was not an exhaustive list and Local Authorities were advised to use their discretion to determine if a business was trading.
14. In March 2021, the government issued some frequently asked questions. Question three of this guidance stated “What if a Local Authority previously rejected funding on the basis that a business was not “open” before restrictions came into force? It said that Local Authorities should revisit these cases and pay those eligible businesses that were previously rejected on the basis of the “open” status.

Additional Restrictions Grant Fund

15. On 31 October 2020 the government announced that national restrictions would be reintroduced. Enhanced business support settlements that had previously been provided to areas entering Tier 3 restrictions were extended and formalised into the Additional Restrictions Grant.
16. Initial government guidance indicated that businesses must have been trading before relevant restrictions were introduced in order to be eligible for this grant but this changed and there is no starting date from which businesses must have been trading in order to qualify.

Rateable Occupation

17. Case law says the four conditions of rateable occupation are:
• actual occupational possession;
• exclusive occupation or possession;
• occupation or possession which is of some value or benefit to the occupier/possessor;
• occupation or possession which has a sufficient quality of permanence.

Principles of good administrative practice

18. In 2018 the Ombudsman published a guidance document setting out the standards we expect from bodies in jurisdiction “Guidance on Good Administrative Practice”. We issued an addendum in response to the COVID-19 pandemic; “Good Administrative Practice during the response to Covid-19”. This shows we expected similar standards from councils, even during crisis working. The following points are relevant in this case.
• 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.

Key facts

19. Mr X signed the lease for a retail unit in November 2019. It was his intention to refit the unit and open the doors to the public on 1 April 2020. He began the building work in January 2020. At the same time, Mr X began trading online. Due to the national lockdown in March 2020, Mr X was unable to open the doors to his shop as planned.
20. Mr X contacted the Council in April 2020 about financial help. He had correspondence with the Council about registering for business rates. The Council treated the property as not rateably occupied and a listed building exemption was added to the business rates account. The Council explained that he was not eligible for the RHLG or the discretionary grant because his business was not open to the public on 11 March 2020.
21. Mr X contacted the Council again in December 2020 about the Local Restrictions Support Grants. He provided information to the Council and on 16 December received an email from the Council saying it was not able to process his grant because he had not demonstrated the business was open immediately before the restrictions were in place.
22. Mr X contacted the Council again saying he had presented evidence he was trading prior to the second lockdown in November 2020. He asked if this was enough evidence to enable him to receive the LRSG.
23. Mr X emailed the Council again on 10 January as he had not received a response to his earlier emails. He said the business had been trading since January 2020. He said it had opened the premises to the public from June 2020 until 5 November 2020. He said he had proof of trade in the form of bank statements and customer invoices and receipts. He said he also had evidence of the rental of the shop premises and utility bills.
24. The Council responded on 18 January 2021. It said it had considered the government criteria and Mr X’s business did not meet it. It confirmed he was not entitled to the RHLG as he was not trading prior to 11 March 2020. It mentioned a press article dated 17 March 2020 about his new business which was to open soon.
25. The Council said in respect of the lockdown from 5 November 2020 and his application for the LRSG, the guidance makes clear the business must have been trading and open to the public the day before the restrictions came into force. It said that while he may have started trading this was clearly not from the premises. It said the evidence provided showed stock had been delivered and deposits made into the business account but nothing showed that the shop was actually open to the public.
26. Mr X wrote to the Council again asking it to reconsider the decision to refuse the LRSG. He provided further details of how the business had operated during the pandemic. He explained he had used the premises as a retail warehouse and a production line for online orders. He said that when the first lockdown ended, he did allow some customers to come to the premises. Mr X said he could provide evidence of this trading if required.
27. The Council’s response dated 3 February 2021 states it looked again at the case but was satisfied Mr X was not entitled to the LRSG as his business did not meet the government criteria. It said there was no further right of appeal but he could ask the Ombudsman to investigate if he considered there had been maladministration. The Council did not provide any response to the points Mr X made in his previous email about trading from the premises.
28. Mr X complained to the Ombudsman about the Council’s failure to pay any grants to his business. In response to our enquiries the Council maintained its position that Mr X was not entitled to the LRSG. However, it reconsidered his entitlement to the Additional Restrictions Grant (ARG) and decided he was entitled as a supply chain business. It made a payment of £10,000 to Mr X on 27 July 2021.

Analysis

29. Mr X was planning to open his business in April 2020 but the first national lockdown prevented him from doing this. As his business was not open on 11 March 2020 he was not entitled to the RHLG. I have spoken to Mr X and he accepts this is the case.
30. Mr X was trading online and then physically opened his shop in June 2020 when the restrictions on non-essential retail eased. Mr X’s application for financial help with the second national lockdown was refused because the Council was not satisfied his business was open and trading on 4 November 2020. While this may have been the correct test in December 2020, government guidance changed and it was clear that a business just had to be trading to qualify for the LRSG. The Council, in its response dated 18 January, appears to accept that Mr X’s business was trading.
31. The government guidance was clarified in 2021 and it then said that where a local authority previously rejected applications because the business was not open but considered to be trading, that it should revisit those applications and make retrospective applications. The Council has not revisited Mr X’s application and says that this is because he was not in rateable occupation of the premises until 14 February 2021.
32. In response to my initial enquiries on this complaint, the Council told me it does not accept the property was rateably occupied prior to 14 February 2021. I made further enquiries on this point as I had not seen anything to suggest the Council had ever raised the issue of rateable occupation with Mr X. In response to my further enquiries the Council said it created the business rates account on 20 May 2020 and a decision was made that the property was not rateably occupied and an empty charge was applied. It says that following this the onus was on Mr X to prove to the Council when he began occupying the property. It says that it has taken the view that Mr X has not provided evidence to show he was occupying the property prior to 14 February 2021.
33. The Council says that while it accepts Mr X’s business was trading in November 2020, it has not determined a physical property from where Mr X was trading before 14 February. It says it is not required to do this but accepts it would support its decision that Mr X was not in rateably occupation of the business premises if it could point to an alternative trading location.
34. It is not the Ombudsman’s role to come to a view on whether someone is in rateable occupation but we can consider if the Council has made a proper decision taking account of relevant factors. In this case there was correspondence between Mr X and the Council about his entitlement to COVID-19 business grants. The correspondence between the Council and Mr X focussed on whether he was trading from the premises and whether it was open to the public. I have not seen anything to show the Council told Mr X that he also needed to prove he was rateably occupying the property and the date this started. While the two issues are linked, rateable occupation and trading are not necessarily the same thing and it is possible that someone could be rateably occupying a property even if they were not trading from it.
35. Mr X has provided considerable evidence to the Council about the business. This includes insurance documents, delivery notes, broadband bills, bank statements, water bills and customer invoices. The Council says that none of this is evidence of occupation of the premises. As stated above, it is not the Ombudsman’s role to take a view on whether the property was occupied or the validity of the evidence provided. However, it seems to me that Mr X was providing evidence to show his business was trading rather than evidence of the date of occupation of the premises. I consider the Council’s failure to be specific about the two different issues of trading and occupation and about the evidence it required was fault.

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Agreed action

36. To remedy any injustice caused to Mr X as a result of fault by the Council it will, within one month of my final decision, take the following action:

• Give Mr X the opportunity to provide evidence to show when he was in rateable occupation. The Council should provide guidance to Mr X regarding the types of evidence that would be acceptable;
• If it accepts Mr X was in rateable occupation prior to November 2020, it should then revisit Mr X’s entitlement to the LRSG on the basis of the updated government guidance that he needed to be trading on 4 November and not open, in order to be entitled to this grant; and
• If entitled to the LRSG, pay Mr X any difference between that grant and the £10,000 already paid to him.

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Final decision

37. I have completed my investigation with a finding of fault for the reasons explained in this statement. The Council has agreed to implement the actions I have recommended. These appropriately remedy any injustice caused by fault.

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Investigator's decision on behalf of the Ombudsman