Summary: Mr X complained on behalf of a company which, in 2020, did not receive a Retail, Hospitality and Leisure Grant set up to support businesses impacted by COVID-19. We find fault in the Council’s customer service and in its explanation for the non-award. This has caused injustice in the form of uncertainty, time and trouble and the Council has agreed to apologise for this. However, we do not consider the Council could have paid the company a grant for reasons explained in this statement.

The complaint

1. I have called the complainant ‘Mr X’. He represents a company I will call ‘Company A’. He acts with the authority of ‘Mr Y’, who is the sole Director of Company A.
2. Mr X complains the Council did not pay a Retail, Hospitality and Leisure Grant to Company A in respect of a public house trading from ‘Building 1’.
3. Mr X says as a result the business missed out on a source of financial support at a time it needed it. Mr X also says the Council acted inconsistently as it paid a grant to a company of which he is the Director (‘Company C’), which operates a bar from a nearby building.

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The Ombudsman’s role and powers

4. 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)
5. 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)
6. 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”.
7. 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

8. Before issuing this decision statement I considered:

• Mr X’s written complaint to the Ombudsman and any supporting information he provided;
• communications between Mr X and the Council about the matters covered by the complaint which pre-dated our investigation;
• information provided to us by the Council in reply to written enquiries;
• relevant Government guidance as set out below.

9. I gave Mr X and the Council chance to comment on a draft of this decision statement. I took account of any comments made in response before issuing this final decision.

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What I found

Grant schemes to support businesses impacted by COVID-19

10. In March 2020, in response to the COVID-19 pandemic, the Government created two grant schemes for small businesses to be administered by local authorities. One of these was the Retail, Hospitality and Leisure (RHL) grant scheme. This scheme closed in September 2020.
11. To be eligible to receive a RHL grant a business had to be first eligible for the Expanded Retail Discount (ERD) scheme for business rates “had that scheme been in force” on 11 March 2020. Eligible businesses would receive a grant of £10,000 or £25,000 dependent on the rateable value of the business premises.
12. 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).

13. The guidance said that “businesses which as of the 11 March were in liquidation or dissolved will not be eligible”. (reference as above – paragraph 24)
14. 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).

15. The Government also published ‘Frequently Asked Questions’ for local authorities administering these grant schemes. Question 18 referred to RHL grants. It asked “how should local authorities deal with businesses who, now a grant is possible, are advising them that they have been in occupation of a property for some time?”. 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 2020. However, Local Authorities have the discretion to depart from this if they know that record was incorrect”.
16. Question 28 raised the issue of businesses forgetting to tell the Council they were in occupation before 11 March 2020. The Government response to this was: “The scheme is based on the rating list and the ratepayer on 11 March 2020. However, local authorities have discretion to depart from this in two respects:

• Where they have reason to believe the information they held about the ratepayer on 11 March is wrong then they may award the grant to the correct ratepayer;
• Where it was factually clear to the local authority on 11 March that the rating list was inaccurate […]”.

Key facts

17. In March 2020 the Council recorded the ratepayer at Building 1 as being Company D. Companies House records show Company D was dissolved in 2016. Neither Mr X or Mr Y were ever officers of that company. Its sole Director at the time of dissolution I will call Mrs V. I note she gave her address and the registered office of Company D as being one used by an accountancy business. All references below to an accountancy business are to the same one. The Council recorded the rates account for Building 1 as being paid and up to date.
18. At the beginning of April 2020 Mr X contacted the Council. His initial contacts concerned the other business premises used by Company C. He said he wanted to put the rates account into the name of Company C. I note there are two current Directors of Company C named on Companies House records since 2017, one of whom is Mr X. I also note Mrs V is a former Director of Company C. The company and all the Directors give their address as being that of the accountancy business. In April 2020 Companies House recorded Company C as dormant.
19. Later in April 2020, Mr X contacted the Council to say he wanted the rates account of Building 1 to be put in the name of Company A. At the time Companies House records showed Company A as dormant. Mr X was listed as its sole Director. Both Company A and Mr X gave their address as being that of the accountancy business. In May 2020 Mr X resigned and Mr Y became its sole Director.
20. Mr X said to the Council he had previously contacted it to amend the record of the ratepayer for each of the buildings. The Council has no record of this. Mr X has not provided any records of such contact.
21. In April 2020 the Council contacted Mr X having noted Companies House recorded Companies A and C as dormant. It asked Mr X to provide bank statements and invoices for stock deliveries.
22. The accountancy business contacted the Council on Mr X’s behalf. In various emails it explained that Companies A and C were no longer dormant and would file accounts within the legally prescribed timescale. It said both had begun trading from their respective premises in November 2019. I note the accountancy company provided proof of insurance for Building 1 in the name of Company A. There were also various receipts and invoices provided intended to show that Company C traded from the other business premises.
23. In May the Council wrote to Mr X wanting more information about Building 1. According to the accountant Company A had only begun trading in November 2019, yet the business rate account was in the name of Company D which had been dissolved since 2016. It therefore wanted Mr X to confirm who was the ratepayer for the intervening period. The Council also asked for proof that Company A was trading from Building 1. It said it would make Company A liable for rates from November 2019 subject to satisfactory proof.
24. For the other building, the Council was satisfied that Company C could be named the ratepayer from 2016. It backdated small business rate relief and subsequently made a payment to Company C from a different grant fund (the Small Business Grant Fund).
25. The Council did not pay an RHL grant to Company A. It has records of Mr X enquiring about the grant in August 2020 and an application was completed for a RHL Grant in respect of Building 1. This was completed in the names of ‘Company A/Company D’.
26. With regard to requests for proof I note that by August 2020 the accountancy firm and Mr X had sent the Council:

• various bank account details and bills suggesting Company A was carrying out some transactions;
• a series of cash flow statements which appeared to show Company A running a business from another building (‘Building 2’) until November 2019.

27. Mr X heard nothing further and in October 2020 complained to the Council that Company A had not received a grant.
28. The Council wrote back saying that it could not pay a grant. It gave its reasons as follows: “The government guidance states in order to be eligible for a grant the business had to be trading on 11 March 2020, and we were required to base our grant awards on the rating list at that date unless we could justify that it was incorrect. I am afraid as insufficient trading activity/ownership etc has not been provided for any of the other businesses […] awards could only be made on the listing information”.
29. At the beginning of March 2021 Mr X made a complaint on behalf of Company A at the non-payment of a RHL grant. Mr X said the business had lost thousands of pounds during the pandemic due to national restrictions on trading.
30. The Council replied to Mr X’s complaint in March 2021. In that letter it again asked for clarification about who was trading from Building 1 (and so should be the named ratepayer) before November 2019 given Company D was dissolved in 2016 and Company A was dormant at the same time.
31. In its reply to Mr X’s complaint, I summarise the Council’s response as below.

• That when Mr X first asked about a grant for Company A there were concerns about “the validity” of this request, given the dormancy of the business over the preceding financial years. So, the Council had asked Mr X for further information.
• This was at a time when it was processing a large number of grant applications (around 6,000) which included a “number of requests received to register for business rates retrospectively in order to claim the grant”. It also had an associated increase in the number of enquiries. The Council said: “at times, it is fair to say that the work completely overwhelmed the team”.
• That a named officer was tasked to review the applications but then went on long-term sickness absence. The Council said: “before he went on absence, it had been identified that internal expertise was requested to consider the requests to register, particularly given the dormancy aspect of the businesses and the lack of accounting statements for those businesses to prove trading”.

32. In May 2021 the Council amended its records to make Company A liable for business rates on Building 1 with effect from November 2019. It told Mr X it could not award the company a RHL grant as the scheme closed in September 2020. The Council has said that it amended the records notwithstanding that it was still waiting for Mr X to provide it with information to clarify who was liable for rates on the property before November 2019.

My findings

33. I find there was fault in how the Council dealt with Mr X’s representations, made between April and August 2020, where he asked it to pay RHL grant to Company A.
34. First, I find the Council made no clear decision on the company’s entitlement to a grant before September 2020 when the scheme closed. I find that by the end of August 2020 Mr X, with the help of his accountant, had provided information to the Council in response to its questions about which business was liable, at which time, to pay rates on Building 1. The Council should have decided, before the grant scheme ended, whether it had enough information to therefore make Company A liable for rates on Building 1 from November 2019. And if so, whether it was also eligible to receive a grant.
35. The comments made by the Council in March 2021, in response to Mr X’s complaint, suggest the Council was struggling to process grant applications and associated requests to amend rates liability around this time. With regard to Company A’s application, these problems were heightened by the complexity of the inter-relationship between various companies involved over time in the running of businesses out of Buildings 1, 2 and that used by Company C. There was also the absence of a key Council officer. While I understand these pressures the Council was under, it was still a service failure if the Council was unable to review grant requests before the schemes closed because of this combination of factors.
36. The second fault I have identified is that in explaining why it did not believe Company A was entitled to a grant, the Council confused Government guidance. I find Government guidance gave councils discretion to pay grants where they learnt a change of ratepayer took place before 11 March 2020, but they were not notified until later. The key guidance is that quoted in paragraph 12 above. This said the Council could take steps to identify the correct ratepayer before paying a grant from either scheme if it had ‘reason to believe’ the information it held about the ratepayer was wrong.
37. That guidance applied here as when Mr X contacted the Council in April 2020 the ratepayer on Building 1 was a dissolved company. So, the Council learnt at that point its ratepayer details were wrong. And as noted in paragraph 13 the Council could not pay a grant to a dissolved business.
38. The next part of the guidance told the Council that it could also take “reasonable steps to identify the correct ratepayer”. I note it did not explicitly tell the Council to pay the ‘correct ratepayer’ a grant. But the Government FAQ document – in particular, the answer to questions 18 and 28 (see paragraphs 15 and 16 above) explained the Council had the power to pay the ‘correct ratepayer’ a grant. The answers also drew a clear distinction between changes to the rating list and changes to the ratepayer.
39. But the Council confused these two concepts when it wrote to Mr X in October 2020 to explain why it could not pay a grant to Company A. Instead, it wrongly referred to that guidance quoted above in paragraph 14. That referred 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 the Council should only exercise this in cases where it knew this on that date. However, in this case there was no error in the rating list on 11 March. It was the record of the ratepayer which was incorrect.
40. The Council therefore took account of guidance that was not applicable to the circumstances of this case while not taking account of relevant guidance. That was a fault.
41. I have gone on to consider the consequence of this fault. I consider Mr X acting for Company A has been caused injustice in the form of unnecessary uncertainty, time and trouble. However, on balance, I do not consider the outcome of the Council’s decision likely to have been any different. So, I do not find Company A has missed out on a grant payment it may otherwise have received. I find it was in a different position to Company C. Because in that case Mr X provided more information to demonstrate there was an ongoing trading business by Company C and it was that company which was liable for those transactions.
42. In the case of Company A, I do not consider Mr X had provided the Council with enough information by September 2020 to make it liable for rates on Building 1. In reaching this finding I have noted.

• That before Mr X contacted the Council in April 2020, no officer from Company A ever contacted the Council to advise it should be made liable for rates on either Building 1 or 2. This was despite the time that had elapsed since Company D was dissolved.
• That Mr X provided inconsistent information. The cash flow records suggested Company A was running a business from Building 2 before switching operations to Building 1 in November 2019. But this was incompatible with the dormant status of the company on Companies House records for the time period in question. It also contradicted a statement made by Mr X’s accountant when the Council first asked questions about Company A being dormant in April 2020.
• That while evidence had been provided to show Company A was transacting before March 2020 and entered arrangements for insurance and so on, there was little in the way of a clear audit trail to link all transactions to the respective business trading out of Building 1.
• Mr X had not answered the question posed by the Council in May 2020 wanting to know which company was liable for rates on Building 1 before November 2019. I note the Council had to ask again for this information in March 2021. I consider it was reasonable for the Council to ask this given the inter-relationship between Companies A, C and D involving interchanging officers and the use of the same accountancy business. It was not until May 2021 the Council backdated liability for rates to Company A from November 2019 for Building 1. It says it only did so at that time pending Mr X providing it with more information.

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Agreed action

43. The Council accepts these findings. To remedy the injustice identified in paragraph 41 it has agreed within the next 20 working days to provide an apology to Mr X accepting the findings of this investigation.

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Final decision

44. For reasons set out above I uphold this complaint finding fault by the Council caused injustice to Mr X when he acted on behalf of Company A. The Council accepts this finding and has agreed action that I consider will remedy that injustice. I can therefore complete my investigation satisfied with its response.

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Investigator's decision on behalf of the Ombudsman