Summary: Mrs X complained the Council wrongly refused COVID-19 business grants, causing financial hardship. There was fault in the way the Council considered whether the business was a restaurant or takeaway. It also failed to consider whether the fact the business operated from a food court meant it was eligible for a Restart grant even if the business was deemed to be a takeaway. It should apologise, pay Mrs X £300 for the uncertainty and additional time and trouble she was put to, and reconsider her Restart grant application.

The complaint

1. Mrs X complained the Council wrongly refused a Local Restrictions Support Grant (Closed)(LRSG) and Restart grant. She said it ignored the fact that the business operated from a shopping centre and was therefore forced to close when the shopping centre closed.
2. Mrs X says the Council did pay a discretionary grant during the second and third national lockdowns but this meant the business received a smaller amount than it would have done under the main scheme.
3. She said the application process was stressful and she was put to additional time and trouble because the Council’s process was not clear and it kept changing its requirements. The business suffered a financial disadvantage as it had to continue to pay overheads such as rent, service charges and utilities whilst closed, which was aggravated by a lack of grant support.

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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. 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”.
6. 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

7. I considered:
• the information provided by Mrs X and the Council;
• relevant Government Guidance, as set out below; and
• our guidance on remedies.
8. Mrs X and the Council had an opportunity to comment on my draft decision and I considered their comments before making a final decision.

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What I found

Relevant Government Guidance

9. The Government introduced various grant schemes in 2020-2021 to support businesses affected by restrictions to prevent the spread of COVID-19.

Local Restrictions Support Grant (Closed) Addendum (LRSG)

10. This scheme provided support to businesses forced to close during the second national lockdown from 5 November to 2 December 2020. It was later extended to cover the third national lockdown from 5 January to 31 March 2021.
11. Eligible businesses were those required to close in line with Government restrictions. The Health Protection (Coronavirus, Restrictions) (England) (No. 4) Regulations 2020 sets out which businesses had to close by law. This included non-essential retail, leisure, personal care, sports facilities and hospitality businesses.

Additional Restrictions Grant (ARG)

12. The Government also provided discretionary funding for councils to support businesses that were required to close or had been severely impacted by the second national lockdown. This was later extended to the third national lockdown.
13. The Guidance, issued on 4 November 2020, said councils could decide how much funding to provide to businesses and which businesses to target. Councils could use the funding to support businesses that were important to its local economy.
14. The Guidance also said:
15. “In taking decisions on the appropriate level of grant, [councils] may want to take into account the level of fixed costs faced by a business in question, the number of employees, whether they are unable to trade online and the consequent scale of coronavirus losses”.
16. This Council’s scheme said that to be eligible, the business must:
• Be trading in Kirklees;
• Have been open and trading as usual before the restrictions;
• Have been legally forced to close or have been significantly impacted by local restrictions from 5 November 2020. Businesses not forced to close will be required to provide evidence of a significant impact on turnover/sales as a result of stricter social distancing measures being implemented; and
• Operating in one of the specified sectors, which included retail and hospitality.
17. The amount of the grant depended on whether the business was required to close or was significantly impacted, and on the rateable value or annual rent/mortgage payment for the business premises.

Local Restrictions Support Grant (Open) Version 2

18. This scheme supported businesses that remained open but were severely impacted by local restrictions between 2 December 2020 and 4 January 2021. Again, the Guidance said councils could decide which businesses should benefit. For businesses premises with a rateable value of £15,000 and under, the Government provided funding for grants up to £467 for each 14 day period that restrictions applied.
19. This Council’s scheme was essentially an extension of the ARG discretionary grant described above.

Restart grant

20. Support was provided to support specific types of business, including hospitality businesses, to enable them to reopen safely after restrictions were lifted following the third national lockdown. To be eligible, the business must:
• Be the liable ratepayer on 1 April 2021;
• Be engaged in offering in-person services in the relevant sectors; and
• Trading (engaged in business activity) on 1 April 2021.
21. The Guidance said a hospitality business could be defined as a business whose main function was to provide a venue for the consumption and sale of food and drink. It suggested councils use the following criteria to assess whether a business was eligible for a grant:
• Businesses offering in-person food and drink services to the general public.
• Businesses that provide food and/or drink to be consumed on the premises, including outdoors.
22. It said the definition of a hospitality retail business should exclude food kiosks and businesses whose main service is takeaway (not including businesses that adapted to offer takeaways during periods of restrictions). However, Annex C, which listed the types of business that were eligible for support under the scheme, included “food courts”.

Additional Restrictions Grant (ARG - Restart)

23. The Council reopened its ARG discretionary scheme to provide support to mirror, as much as possible, the Restart scheme to support those businesses that did not pay business grants, and operated in the following sectors:
• Non essential retail (and their supply chain), which could apply for grants of between £2,667 - £6,000; and
• Leisure, hospitality, visitor accommodation and personal care sectors (and their supply chains), which could apply for grants of between £8,000 & £18,000.
24. The amount of the grant was dependent on the business’s property costs and was calculated in line with the Restart grant.
25. Home based and self employed businesses in impacted sectors were eligible for a grant of £1,500.

Valuation Office Agency (VOA)

26. The 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 1.9 million commercial properties for business rates: the rating list.

What happened

27. Mrs X operates a food business located in a food court in a shopping centre. The business provides food and drink for consumption on its premises and on a takeaway basis.
28. Mrs X applied for the LRSG for the second national lockdown on 19 November 2020. On the application form she described the business as a café/canteen. She said it was forced to close from 5 November 2020 due to the second national lockdown.
29. On the same application form she also said the business had been severely affected by local restrictions from 5 August to 4 November 2020. She said turnover was less than 80% of turnover for the same period in the previous year, despite a boost from the Government’s Eat Out To Help Out Scheme.
30. The Council refused the LRSG on 18 December 2020 because it said takeaways were not forced to close. It said the LRSG was only available to those businesses forced to close and provided a link to further information on the Gov.UK website. It said if the business was significantly impacted by COVID-19 restrictions she could apply for a discretionary grant.
31. Mrs X asked for an appeal on 22 December 2020. She said the business was located in a shopping centre in the Council’s area, which was closed throughout the second lockdown. Therefore, her business was also forced to close.
32. She emailed again on 9 January 2021 to say she had reread its decision and the Council was incorrect to state the business was a takeaway because it had seating for some customers to eat on the premises. It had not been able to offer a dine-in service even when the shopping centre was open due local restrictions. This included during the Christmas period, which would usually be a busy time for customers eating on the premises. It is unclear whether the Council received this email. Mrs X sent a further copy on 25 January 2021, noting she had not received the usual automatic response after sending it.
33. On 2 February 2021, the Council confirmed it had set up an independent team to reconsider applications, and this team would reconsider her application. In response, Mrs X confirmed the business was now closed due to the third national lockdown. She offered to provide evidence from her landlord and photographs of the seating if that was helpful.
34. On 11 February 2021, the landlord emailed the Council to confirm Mrs X’s business had not been able to open during the second and third national lockdowns, and also that the business did have seating for customers to eat on the premises. The Council replied that the initial decision was based on the information on the VOA rating list and noted the business premises were rated as a shop rather than a café or restaurant. It accepted the information on the rating list may not be accurate in all cases and this was something its reconsideration team could address.
35. On 12 February the reconsideration team asked Mrs X for evidence that 50% of sales related to eating-in customers. It said the business would not be eligible if the dine-in sales were less than 50% but if that was the case the business could apply for an ARG discretionary grant.
36. Mrs X responded on 16 February 2021. She understood the guidance said the Council could use its discretion to identify the right business to receive the funding. She considered her business should qualify because:
• The business was closed during both national lockdowns because the shopping centre was closed, and her landlord could confirm this;
• Trade was significantly affected as the comparative figures provided with the email showed. The business operated a restaurant with seating and was not just a shop or takeaway; and
• Outlets in two other council areas had received these grants from the relevant councils. Those outlets operated in the same way.
37. The reconsideration team asked for accounts evidence to show the split between eating-in and takeaway sales. It repeated that it needed evidence that at least 50% of the sales were for consumption on the premises to treat the business as a restaurant.
38. Mrs X was not able to provide the evidence sought for the period before the pandemic because she said the till she used then did not show that split. She explained that cold eat-in food was recorded separately for VAT purposes but not hot food. This was because the VAT rate on hot food was the same whether the good was eaten in or sold as a takeaway. She also questioned why it was necessary to show the 50/50 split since that requirement was not mentioned in the Guidance. She said she could provide a breakdown of sales between eat-in and takeaway from March 2020 onwards but this was not the period the Council asked for evidence for.
39. In the absence of the evidence it requested, the Council decided the business was a takeaway and therefore not eligible for the LRSG. It notified Mrs X of its decision on 25 February 2021. It said its decision was final and there was no further appeal. However, it would ask another team to consider if the business was eligible for a discretionary grant.
40. In response to my enquiries about why it did not consider other evidence when deciding whether the business was a restaurant or takeaway, such as photos or evidence from Mrs X’s landlord, the Council said its local knowledge of the business meant it was aware the business was a takeaway because it did not have its own seating area. It added that it understood there was a requirement to pay VAT on dining services and that other businesses offering dine in as well as takeaway kept a record of their dining-in sales for that purpose, which they were able to provide.
41. On 24 February the Council awarded the business £3,068 under the LRSG (Open) scheme for the period of local restrictions between 5 August and 4 November 2020. Mrs X has not complained about the grant awarded under this scheme, which Mrs X accepts was calculated in line with the scheme.
42. On 5 March a further payment was made from the discretionary scheme totalling £7,335.00 including support relating to the second national lockdown (£1,334), the first part of the third national lockdown (£2,001 for the period to 15 February 2021) and a top-up (£4,000). Its letter to Mrs X dated 5 March 2021 setting out how the payment was calculated said she might be entitled to support for the period 2 December 2020 to 4 January 2021 (the period between the second and third national lockdowns) and asked her to provide evidence of the impact of restrictions in that period on turnover. It did not include a deadline for providing this. The Council said its discretionary grants team did not receive a response to that letter or any evidence of the impact on turnover in that period.
43. Records show a further payment of £2,096.00 was made for the period 16 February until the third national lockdown ended on 31 March.
44. The payments from the discretionary scheme were all calculated on the basis the business was forced to close.
45. On 10 June 2021, Mrs X contacted the Council to ask for an update on the Restart grant. There was no separate application process for this grant: the Council used information from LRSG applications. The Council initially referred Mrs X to its email of 25 February 2021. It later clarified that the discretionary grant team had confirmed the Restart grant would be paid from the discretionary scheme and payment would be made by the end of the week.
46. On 15 June 2021 the Council said takeaways were not entitled to the Restart grant and therefore the business was not eligible for an equivalent payment from the discretionary scheme. It said it had paid all the grants the business was entitled to.
47. Mrs X challenged the decision, which she said was unfair because other units within the shopping centre would be paid the grant. The Council responded that takeaways were not forced to close so were not eligible for the Restart grant. It could not consider the business as a restaurant because Mrs X was not able to provide evidence to show the split of sales. There was no further right of review but Mrs X could complain to us if she felt the Council had not administered the schemes properly.
48. Mrs X reiterated the business was forced to close because its premises could not be accessed when the shopping centre was closed unlike other takeaways that continued to trade. She pointed out the Guidance made a distinction between a food court and other takeaways. She asked how to complain. The Council responded that the application had been through the appeal process but it would ask the relevant team to explain why the business did not qualify under the discretionary scheme. I have not seen any further response from the Council.
49. Mrs X complained to us.

My findings

5 August to 4 November 2020

50. The Council paid the business a grant of £3,069.68 for this period. Mrs X has not complained about this grant, which she accepts was calculated and paid in line with guidance.

Second and third national lockdowns (4 November to 2 December 2020, and 5 January to 31 March 2021)

51. The Council initially refused the grant for the second national lockdown based on the information on the rating list. Since the business was listed as a shop, it assumed it was a takeaway business and therefore not eligible for the grant. It was not at fault for relying on information on the rating list when making its initial decision.
52. When Mrs X challenged the decision, the Council considered whether the business was mainly a restaurant or a takeaway. The Council was required to decide what the main business was in order to determine whether the business was eligible for the lockdown grants and was entitled to ask for relevant evidence to determine this. It asked Mrs X to provide evidence of the split between eat-in and takeaway sales but she was not able to provide the specific evidence it required for the period in question. In the absence of that evidence, the Council decided the business was a takeaway.
53. The Council did not consider any other evidence when deciding the business was a takeaway, such as photographs of the seating area, which Mrs X offered to provide in January 2021. The photo she sent me does show a seating area for the business. Nor did it consider the evidence from her landlord, who confirmed the business did have some seating for customers.
54. In response to my enquiries, it said it relied on its local knowledge that the business did not have its own seating, which Mrs X disputes, but it did not give this as a reason for its decision in February 2021 and I have seen no record to show how it considered this.
55. There is also no evidence the Council took into account this business was, in a practical sense, forced to close because customers could not access it when the shopping centre was closed, unlike takeaway businesses situated elsewhere that could continue to trade.
56. On the basis that the Council has not demonstrated it considered all relevant information when deciding the business was a takeaway, I find fault with its decision making process.
57. Having said that, the records show the Council considered and paid grants through its discretionary scheme. It calculated the amount of the grant on the basis the business was closed, which was correct. As a result, the Council paid the business the same amount of grants that she would have received under the LRSG scheme. Therefore, her business was not financially disadvantaged by the fault during the periods of the second and third national lockdowns. However, she did suffer some uncertainty over whether she had been paid the correct amount and was put to the time and trouble of pursuing the Council and then complaining to us to establish this. And this decision affected her application for a Restart grant, as I will discuss below.

2 December 2020 to 4 January 2021

58. On 5 March 2021 the Council asked Mrs X to provide evidence of the impact of restrictions on turnover in this period to enable it to consider if the business was eligible for a payment. Mrs X did not respond to that letter. However, she had already provided evidence the business was significantly impacted by the restrictions in that period to the business rates team on 16 February 2021. Since the business rates team then asked the discretionary grants team to consider a payment, I consider it should have provided to that team any relevant evidence Mrs X had already sent it. In the circumstances, although it is generally the applicant’s responsibility to provide the evidence needed, I consider the Council was at fault in this case for not appropriately sharing information between teams.
59. That said, the Council has now considered that evidence, and calculated the business’s turnover was down by 17% compared with the same period in the previous year. Since the scheme required Mrs X to show the turnover was at least 20% lower than in the previous period, the business was not eligible for this grant. Therefore, the business has not lost out financially, but Mrs X was put to the extra time and trouble of pursuing this with the Council and then by complaining to us.

Restart grant

60. On 10 June 2021, the Council said it would pay a sum equivalent to the Restart grant from its discretionary scheme and payment would be made by the end of the week. On 15 June 2021 it said the business was not eligible. The Council should not have told Mrs X it would be making a payment without checking she was entitled to it. This unfairly raised her expectations and was fault.
61. The Council later said the business was not eligible because it was a takeaway and takeaways were excluded from its discretionary scheme. The Council’s discretionary scheme did not expressly exclude takeaways, although it did state it was intended to mirror the Restart scheme, which did exclude them, and the scheme has been consistently applied in that way. It would have been good practice to have been specific about types of businesses that were excluded but I do not consider that warrants a finding of fault in the circumstances.
62. That said, the Guidance for the Restart grant scheme, although it expressly excluded takeaways, also said at Annex C that food courts were eligible under the scheme. Mrs X pointed out this distinction to the Council but I have seen no evidence the Council considered this. It simply said that it decided the business was a takeaway and therefore it was not eligible.
63. I have found fault with its decision making process when it decided the business was a takeaway. I consider the failure to properly consider the fact the business operated in a food court to be further fault. The guidance made a distinction between takeaways, which were excluded, and businesses based in food courts, which were included in the scheme. Businesses based in food courts could not open because the shopping centres they were based in were closed.
64. The Council should have considered whether, in light of the distinction in the guidance, the business was entitled to a Restart grant under the main scheme or under its discretionary scheme. It could have considered whether the business was eligible under the main scheme through its reconsideration process. Had it decided the business was eligible for a Restart grant, it would have paid it a grant of £8,000.

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Agreed action

65. The Council will, within one month of the date of the final decision:
• apologise to Mrs X for its failure to properly consider whether the business was a restaurant or takeaway, its unfairly raising her expectations about a discretionary grant equivalent to the Restart grant, and its failure to consider whether the business was eligible for the main Restart grant because it operated from a food court; and
• pay her £300 for the distress and uncertainty caused by it unfairly raising her expectations about the payment of a Restart grant and for the additional time and trouble she was put to in pursuing the Council to resolve the matter
66. The Council will, within two months of the date of the final decision, reconsider the application for a Restart grant, including:
• reconsidering whether the business was a restaurant or takeaway, taking into account all relevant factors, including determining whether the business in fact had seating for dine-in customers and whether 50% or more of its turnover related to dine-in sales; and
• reconsidering whether the fact the business operated from a food court meant that it would be eligible even if it was deemed to be a takeaway.
• It will provide Mrs X a written decision, setting out the reasons for its decision. If it decides the business should have received a grant from either scheme, it should pay the business an amount equivalent to the grant it missed out on as a result of its earlier decisions.

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Final decision

67. I have completed my investigation. I have found fault leading to personal injustice. I have recommended action to remedy the injustice.

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Investigator's decision on behalf of the Ombudsman