Summary: Mr B complained the Council did not award his business a grant under a scheme to support businesses impacted by COVID-19. We uphold the complaint as we find the Council did not properly consider if Mr B’s business should be liable to pay business rates. Consequently, it also did not apply itself properly to Government guidance accompanying the grant scheme. This causes injustice as it creates uncertainty about whether Mr B’s business therefore had an entitlement to a grant. The Council accepts these findings and at the end of this statement, we set out the action it has agreed to remedy this injustice.

The complaint

1. I have called the complainant ‘Mr B’. He complains on behalf of his business which provides legal services. Mr B complains that in June 2020, the Council did not award his business a small business grant to support businesses impacted by COVID-19.
2. Mr B says as a result the business was denied a source of financial help at a time when it was needed.

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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”.
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. Before issuing this decision statement I considered:

• Mr B’s written complaint to the Ombudsman and any supporting information provided;
• information provided by the Council;
• relevant law and guidance as referred to in the text below;
• the Ombudsman’s published guidance on remedying complaints.

7. I sent Mr B and the Council a draft decision statement for comment. I took account of any comments or new evidence provided in response, before finalising this decision statement.

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What I found

The Small Business Grant Fund

8. In March 2020, in response to the COVID-19 pandemic, the government created grant schemes for small businesses to be administered by local authorities. One of these was the small business grant fund (SBGF).
9. To be eligible to receive an award from the SBGF the business premises had to be eligible to receive small business rate relief (SBRR) or rural rate relief. SBRR is granted to most property with a rateable value of less than £15,000 (generally so long as it is the only property used by the business).
10. Businesses eligible to receive funding from the SBGF with a rateable value of less than £15,000 would receive a £10,000 grant.
11. Government guidance, headed “Who will receive this funding?” said:

• “The person who according to the billing authority’s records was the ratepayer in respect of the hereditament on the 11 March 2020” (the term hereditament refers to any rateable property and/or land).
• “where the Local Authority has reason to believe the information they hold about the ratepayer on the 11 March is inaccurate they may withhold or recover the grant and take reasonable steps to identify the correct ratepayer.” (see Grant Funding Schemes – Small Business Grant Fund and Retail, Hospitality & Leisure Grant Fund Guidance – version 6, paragraphs 34 to 35).

12. Further government guidance discussed “Rating List Changes”. It said:

• Any changes to the rating list (rateable value or to the hereditament) after 11 March 2020 including changes which have been backdated to this date should be ignored for the purposes of eligibility.
• Local authorities are not required to adjust, pay or recover grants where the rating list is subsequently amended retrospectively to 11 March 2020.
• In cases where it was factually clear to the Local Authority on 11 March 2020 that the rating list was inaccurate on that date, Local Authorities may withhold the grant and/or award the grant based on their view of who would have been entitled to the grant had the list been accurate.
• This is entirely at the discretion of the Local Authority and only intended to prevent manifest errors”. (reference as above - paragraphs 40 to 43).

13. The government also published ‘Frequently Asked Questions’ for local authorities administering these grant schemes. Question 34 asked the following: “Would businesses telling Local Authorities now that they moved in prior to 11 March 2020 be eligible for a grant if they are entitled to Small Business Rate Relief?”. The answer given was: “Any changes to the rating list after 11 March 2020, including changes which have been backdated to this date, should be ignored for the purposes of eligibility. Local Authorities are not required to adjust, pay or recover grants where the ratings list is subsequently amended retrospectively to 11 March 2020. The eligible business is the ratepayer in Local Authority records for 11 March. However, Local Authorities have the discretion to depart from this if they know that record was incorrect”.
14. Question 61 asked “What are the appeal rights for this grant if we refuse to pay it after consideration of the guidance?”. The answer given is that “there is no appeals procedure. It is up to Local Authorities to apply the guidance as they see fit”.

Valuation Office Agency

15. The Valuation Office Agency (VOA) provides valuations and property advice to support taxation and benefits to the government and local authorities in England, Scotland and Wales. It compiles and maintains lists detailing the rateable value of commercial properties for business rates.

Liability for business rates

16. The Local Government Finance Act 1988 (LGFA 1988) identifies three categories of ratepayer:
• occupiers;
• owners; and
• persons named in central rating lists.
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.
18. There is significant case law on rates liability. It is for a council to decide who is the correct liable ratepayer. However, the Ombudsman can consider if a council has followed a proper decision-making process when deciding who is liable to pay rates.

Principles of good administrative practice

19. In 2018 the Ombudsman published a guidance document setting out the standards we expect from bodies in jurisdiction called “Principles of Good Administrative Practice”. This included the principle of “acting fairly and proportionately”. We said this included “dealing with people and issues objectively and consistently”. Good practice meant “explaining clearly the rationale for decisions and recording them” and having “clear and accessible appeal routes”.
20. The guidance also included the principle of “putting things right”. We said local authorities should:
• acknowledge mistakes and apologise where appropriate;
• put mistakes right quickly and effectively;
• provide clear and timely information on how and when to appeal or complain;
• operate an effective complaint procedure, which includes offering a fair and appropriate remedy when a complaint is upheld.
21. In May 2020 we issued an addendum in response to the COVID-19 pandemic; “Good Administrative Practice during the response to Covid-19”. Although we recognised councils were working under pressure we still expected similar standards. We said decision reasons should remain clear, evidence based and where necessary explained in the particular context and circumstances of that decision. We also said that although complaint handling capacity may be reduced it remained important authorities maintained systems for logging complaints and replying in due course. We said complaints could be “an effective and immediate form of feedback during the crisis”. They could alert councils “where new challenges are emerging and where things are going wrong”.

Key facts

22. At the beginning of the events covered by this complaint, Mr B’s business rented office space under a license agreement. The office building was owned by one company and the offices managed by a different company. The offices were rented as serviced offices and licenses allowed rental on a short-term basis.
23. There are over 30 serviced offices in the building and each one has its own entry on the rating list. Presently the ratepayer for all these offices is recorded as the owner of the building. The managing company corresponds regularly with the Council and lets it know when different offices are occupied or if they are standing empty. It does not give the Council details of the businesses or individuals renting those offices.
24. Mr B’s business worked out of the building for several years. It occupied one named office suite in the building between April 2019 and June 2020 (having previously occupied a different office suite in the building).
25. The license agreement provided to Mr B’s business from the managing company said nothing about liability for business rates. I note the rateable value of the office rented by Mr B’s business was under £15,000.
26. Mr B’s business initially contacted the Council in May 2020 saying it wanted to claim funding from the SBGF. The Council refused giving its reason as being the company “was not registered” at the address quoted. Mr B’s business explained in emails that the business stationery etc still referred to the business as occupying a different office suite. This was with the consent of the office managing agent (which it confirmed) as the previous numbered office occupied by the business no longer existed following a renovation of the building.
27. Mr B’s business received no further response and so made a second claim for funding from the SBGF. It followed that up with a further email and sent the Council a copy of the license agreement.
28. On 30 June the business received an email from the Council saying the deadline had passed for it to apply for a different discretionary grant scheme. Mr B’s business replied saying this was not what the business had applied for.
29. The Council says that its records show that it refused a SBG a second time in early July 2020. However, it cannot locate a copy of that decision.
30. In September 2020 Mr B says his business made a telephone call to the Council to chase the progress of the claim and then submitted a further email. When it received a reply to neither Mr B made a complaint.
31. Mr B received no reply to that complaint and in March 2021 asked us to investigate. We asked the Council to confirm what action it had taken in response to Mr B’s complaint. The Council said when it received the complaint from Mr B’s business it was not logged as such. Instead, it was recorded as an enquiry and forwarded to the business rates service to respond. The Council says at the time it was not treating expressions of dissatisfaction made on behalf of “groups or bodies” as complaints. It has now changed this practice and says if Mr B’s business complained today it would register any such correspondence as a complaint.
32. In March 2021 the Council replied to the substance of Mr B’s complaint as follows. That:

• to receive a payment from the SBGF, a business must be a ratepayer;
• its records recorded the building owner as the ratepayer and this was so on 11 March 2020 for all office suites in the building;
• the managing company had not advised the Council that Mr B’s business should be liable for rates;
• because Mr B’s business was “not registered within the business rates scheme on 11 March” it could not receive a grant;
• the Council could only use discretion to pay a grant where it “had knowledge prior to 11th March” that the details it held were incorrect;
• the scheme had in any event closed on 30 September 2020.

33. In response to our enquiries the Council says that Mr B’s business is the only one that has ever used an office within the block which asked it to change the liability for business rates from the company owning the offices. The Council has indicated that it would be now willing to reconsider whether Mr B’s business should have been liable to pay rates.
34. While we have been conducting this investigation we have also been conducting two concurrent investigations which consider the Council’s decision not to pay grants to businesses under schemes set up to support those impacted by COVID-19. During those investigations the Council has shared with us email exchanges that it had with the Department of Business, Energy and Industrial Strategy (BEIS) which issued the guidance on the administration of the SBGF quoted above. It has also shared exchanges from another London authority which communicated with BEIS and which, like the Council, is a member of the ‘London Revenues Group’.
35. The Council had an email exchange with BEIS in August 2020. The Council noted government guidance allowed it “an element of discretion” to pay grants to businesses which it retrospectively learnt had been occupying premises before 11 March 2020. But said it had “not been made abundantly clear” if the Council would receive funding for such payments. The email explained that it considered the Government guidance contradictory in the approach to be taken when it had amended a rates bill retrospectively.
36. BEIS replied that “these grant schemes only apply to businesses who were trading, occupying premises and liable for business rates on 11 March 2020”. It said “this was to avoid businesses being established for the sole purpose of applying for grants” and “businesses that were started/or occupied property and became liable for business rates after this date will not be eligible for support”. The email went on to say the Council could withhold or pay grants if it was factually clear its rating list was inaccurate on 11 March but “this discretion is only intended to prevent clear errors [and] any decisions made after 11 March 2020 should not affect eligibility”.
37. The Council found this response confusing and asked BEIS to clarify further saying it was “seeking clarity on cases where we were retrospectively advised after 11 March 2020 that someone occupied on or before 11 March 2020 and has evidence of being both in occupation and trading on or before 11 March 2020 and therefore should be liable” (emphasis as per original). The Council did not receive a reply to this email.
38. The Council has also drawn our attention to an exchange with BEIS initiated by another London local authority. This was the authority which sought legal advice on whether it could pay grants to businesses who were occupying premises on 11 March 2020 but were only subsequently made ratepayers. The advice said a “strict” interpretation of the guidance quoted at paragraph 11 meant the authority could not pay a grant to the ‘correct ratepayer’. However, it suggested the “surrounding wording” indicated this was not the Government’s intent. It also noted an email from BEIS had suggested the authority had discretion. So, it suggested the authority contact BEIS for clarification. Which it did by asking BEIS the following:
1. “Where we have reason to believe that the information we held about the identity of the ratepayer on 11 March was wrong, then we may update our records after 11 March to the correct ratepayer and providing the ratepayer’s liability to pay business rates was dated before 11 March, can we award the grant to the correct ratepayer?
2. If we pay business grants to a) above, providing we have taken reasonable steps to identify the correct ratepayer we will not be held responsible for any payments made in error?”
39. BEIS replied to both questions “Yes” (emphasis as per original). In answer to question a) BEIS referred to guidance quoted in paragraph 11 above that councils could take steps to identify the correct ratepayer.

Findings

40. I consider this complaint raises three key issues. The first is the action the Council should take when advised by a business that it is occupying premises where the Council has recorded a different ratepayer. The second is what implications such contact had, if made after 11 March 2020 (but before the end of September 2020) in relation to requests that it also make an award from the SBGF scheme. The third is the response of the Council to any dissatisfaction expressed by a business in relation to its actions in respect of either or both of these matters. I will consider each issue in turn.

The dispute over liability

41. As I explained above, it is not our role to come to a view on who should be liable to pay rates on business premises. But we can consider if the Council has made an administratively sound decision on liability taking account of relevant factors and ignoring anything irrelevant.
42. In this case I do not find the Council has made such a decision. It has a longstanding arrangement with the managing company to make the owner of the office building liable for the rates and for it to tell it which offices are occupied or standing empty. Until contacted by Mr B’s business, it had never been challenged about this arrangement which it implies works well. It has also said that the managing company did not ask it to make Mr B’s business liable to pay rates on the office it rented.
43. I do not underestimate the value of the current arrangement to the Council. But its administrative convenience is not a relevant factor in deciding if Mr B’s business should be the liable ratepayer. It is also not for the managing company to decide who is liable to pay rates. It is the Council’s decision and one that must take account of the four tests of rateable occupancy summarised above.
44. While the Council has now indicated a willingness to apply itself to those tests in respect of Mr B’s business, its failure to do so up to now justifies a finding of fault. I will set out below the injustice this has caused Mr B’s business.

The administration of the SBGF scheme

45. The Council has implied that amending its liability details makes little difference to its decision on whether Mr B’s business could receive a payment from the SBGF. Because the Council has told Mr B that as it did not know on 11 March 2020 that he was occupying an office for which the owner is listed as ratepayer, his business cannot receive a grant.
46. This is an over-simplification of the Government guidance on the SBGF scheme. The guidance explained the Council had discretion to pay grants when it was approached by businesses in circumstances like those of Mr B. Specifically, when the Council potentially learnt of a change of ratepayer which had taken place before 11 March 2020 but it was not notified until after that date.
47. The key guidance is that quoted in paragraph 11 above. This said the Council could take steps to identify the correct ratepayer before paying a grant. It directed the Council to consider the information “they hold” about the ratepayer, in the present tense. This means the Council had to consider what it knew on the day it was administering grant payments, which in all cases post-dated 11 March. So, it did not direct the Council to make decisions on who could receive a grant based only on what it knew on 11 March. It could take account of information which came to light subsequently relevant to the question of who the ratepayer should be.
48. This approach was then emphasised in the next passage in the guidance which invited the Council to consider if it had ‘reason to believe’ the information it held about the ratepayer was wrong on the date of its decision. And if so, then it could take “reasonable steps to identify the correct ratepayer”. We accept this guidance could be clearer and it did not explicitly tell the Council to pay the ‘correct ratepayer’ a grant. But we consider there was still enough information known to the Council which clarified that it was the Government’s intent that it could use its discretion to pay a grant to the ‘correct ratepayer’.
49. First, the Government provided the FAQ document. The answer to question 34 of the FAQ explained the Council had the power to pay the ‘correct ratepayer’ a grant; see paragraph 13 above.
50. Second, there is the evidence from our concurrent investigations which shows the Government provided further confirmation the Council had discretion to make payments to the ‘correct ratepayer’ where it learnt that it had the wrong ratepayer recorded on 11 March; see paragraph 39 above.
51. We also note from its email exchanges with BEIS the Council knew in August 2020 it had discretion to pay grants to the correct ratepayer. Yet when the Council wrote to Mr B in March 2021 it did not acknowledge this. Instead, its response appears to have conflated the guidance I quoted in paragraph 11 with that in paragraph 12. The guidance in paragraph 12 refers to changes in the ‘rating list’ which is the record of all hereditaments (property and land) where business rates are potentially payable. This guidance too gave local authorities some discretion on paying grants where the rating list was wrong on 11 March. But implied it should be exercised only in cases where the Council knew this was the case on that date. But in this case there were no errors in the rating list on 11 March. It was the record of the ratepayer which was potentially incorrect.
52. The Council has therefore not applied itself to the correct guidance in considering if Mr B’s business could receive a payment from the SBGF. That is a fault. I will set out below the injustice this has caused Mr B’s business.

The expressions of dissatisfaction

53. I considered next how the Council dealt with the expressions of dissatisfaction from Mr B. The Government did not set up an appeals mechanism for this grant scheme. However, as I explained above it is one of the fundamental principles of good administrative practice that councils must be open to the idea that a decision maker can get something wrong. While we recognised the pressure councils were operating under during the height of the COVID-19 pandemic we were also clear this should not lead to an abandonment of this principle. So, the Council should, as a minimum, have been offering access either to a review of its decision, or access to its complaints procedure to all those dissatisfied with a decision about a grant application. These routes of redress become more important in circumstances where a decision does not carry any statutory or formal right of appeal.
54. Yet when Mr B complained at the Council’s decision to refuse his business a grant that expression of dissatisfaction was not considered as a complaint. It only received any further scrutiny from the Council, after a delay of six months, when this office began making enquiries. Both the failure to record Mr B’s dissatisfaction as a complaint and the delay in answering that, justify a further finding of fault.

The injustice caused to Mr B’s business

55. The Council has not taken an administratively sound decision on Mr B’s business liability to pay rates or its potential entitlement to a payment from the SBGF. This creates uncertainty as we cannot say whether the Council should have made the business liable or awarded such a grant. This is an injustice as we regard uncertainty as a form of distress. In addition, I consider the Council missed opportunities to properly consider these matters sooner which put Mr B to unnecessary time and trouble.

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Agreed action

56. The Council accepts these findings. Where we find fault causing an injustice to the complainant we aim to put them back in the position they should have been in but for any fault. The Council has therefore agreed that within 20 working days of this decision it will:
1. apologise to Mr B, accepting the findings of this investigation;
2. pay Mr B’s business £250 in recognition of the distress and time and trouble;
3. begin a reconsideration of whether Mr B’s business should have been liable to pay rates on the office it rented;
4. commit that when it has completed the reconsideration at c) above it will reconsider if Mr B’s business was therefore eligible to receive a grant from the SBGF; this decision will be taken by an officer with no previous involvement in the case within 20 working days of receiving the opinion at c) above; if the Council finds Mr B’s business should have been entitled then it will pay the business the equivalent of the grant it should have received (i.e. £10,000). In either event the Council will write to Mr B with its decision and reasons.

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Final decision

57. For reasons set out above I have upheld this complaint finding fault by the Council causing injustice to Mr B’s business. The Council accepts these findings and has agreed action to remedy that injustice. Consequently, I can now complete my investigation satisfied with its response.

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Investigator's decision on behalf of the Ombudsman