South Oxfordshire District Council (21 011 416)

Category : Benefits and tax > COVID-19

Decision : Upheld

Decision date : 31 Mar 2022

The Ombudsman's final decision:

Summary: Mr X complained about the Council’s decision to seek repayment of COVID-19 business grants and that this will cause him financial difficulties. The Council wrongly awarded the grants which was fault. There is no evidence of fault in the Council’s actions to recover the grants after it realised it had paid them in error.

The complaint

  1. Mr X complained about the Council’s decision to seek repayment of COVID-19 business grants after deciding he was ineligible.
  2. Mr X says this will cause his business significant financial difficulties.

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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. 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)
  2. 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”.
  3. 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

  1. 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 taken account of their comments in reaching my final decision.

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What I found

Grant schemes

  1. The Government introduced various grant schemes to support businesses affected by the COVID-19 pandemic. These had varying eligibility criteria and closing dates. However, in each case the council was to make payment to the recorded ratepayer.
  2. Local Restrictions Support Grants (LRSG) provided support to businesses affected from October 2020. The LRSG (closed) grants were for businesses the Government ordered to close and included non-essential retail, leisure, personal care, sports facilities and hospitality businesses.
  3. The Additional Restrictions Grant (ARG) provided support for businesses affected from November 2020. This was a discretionary grant and so councils could set their own criteria based on local priorities.
  4. The Closed Business Lockdown Payment provided support for businesses affected from 5 January 2021 and was paid in addition to the LRSG. It was a one-off payment for businesses mandated to close by Government and included non-essential retail, leisure, personal care, sports facilities and hospitality businesses.
  5. The Restart Grant provided support to businesses to enable them to reopen safely after restrictions were lifted. It was a one-off payment for businesses predominantly reliant on delivering in-person services to the general public.

Government guidance on debt recovery

  1. The Government issued guidance to local authorities in May 2021 on debt recovery. This replaced the guidance previously issued in December 2020. The guidance stated that if there had been an error by the Local Authority it should take all reasonable and practicable steps to recover the funds.
  2. The guidance says to meet the reasonable and practicable steps requirement, the Local Authority will need to undertake a minimum three-step approach to try and recover any erroneous/ineligible business grants. This consists of raising an invoice, sending a reminder letter and sending a final opportunities letter.
  3. The guidance says that if reclaiming funds is not possible, Local Authorities should refer the debt to the Department for Business, Energy and Industrial Strategy.

Key facts

  1. Mr X runs a sports academy. As well as outdoor facilities, Mr X operates his business from three separate hereditaments (any property or land that is on the rating list) at one address. The Council says that one is used for retail and the others are offices used for administration.
  2. In November 2020, Mr X submitted a grant application in respect of one hereditament. The premises in question is a first floor unit and is described on the rating list as office and premises.
  3. The Council paid the following grants to Mr X in respect of this hereditament:

Local Restrictions Support Grant (closed) Addendum – 5 November to 2 December 2020 – paid £1,334

Local Restrictions Support Grant (closed) Addendum Tier 4 – 26 December 2020 to 4 January 2021 - £476

Local Closed Business Lockdown Payment - £4,000

Local Restrictions Support Grant (closed) Addendum – 5 January to 15 February - £2001

Local Restrictions Support Grant (closed) Addendum – 16 February to 31 March 2021 - £2096

Restart Grant - £8,000

  1. On 24 May 2021, the Council sent Mr X an email asking him to confirm what the main use of the property was. Mr X replied within the hour saying the upstairs offices are used for admin and office work. He confirmed they are not retail. He went on to say the nature of the business meant he provided coaching and activities at a sports ground he owned at another location. The Council said it was passing the information to its investigation team to review his eligibility for grants paid in respect of this hereditament.
  2. Mr X responded saying people did come to the office in order to sign up for the academy and for other business transactions. He said he could not coach children in an office and so that is why this was just offices for admin. He said the majority of the services are in-person services and he had suffered large losses because of the pandemic. He said it was his understanding he was eligible for the grants.
  3. The Council emailed Mr X later the same day. It said based on the information he had provided, it took the view the primary activity was not provided at this property. It said the primary activity was sports coaching and that was provided at the business’ sports ground. It said the Council’s investigation team would be in contact about the grants.
  4. The Council emailed Mr X on 7 June saying it had established he was not eligible for the Restart Grant as the business was not providing services within one of the business or service sectors prescribed by government guidance from these premises. It said the grant amount of £8,000 would need to be repaid and it provided details of how to make the repayment.
  5. Mr X replied on 8 June saying that he runs a leisure business and provides coaching on a group and one to one basis. He said that he uses the office to conduct meetings with new customers and to provide personal and video feedback following coaching sessions. He believed he was eligible for the grant and that he should not be required to repay.
  6. The Council wrote again to Mr X saying it had treated his email as an appeal to the decision that the restart grant was repayable. It said that in previous correspondence Mr X had confirmed the upstairs office is used for admin and office work and are not retail. It also said Mr X had confirmed that it provided coaching and activities elsewhere particularly at a sports ground he owned. The Council explained the restart grant is a one-off grant to support businesses occupying hereditaments that are predominantly reliant on delivering in-person services for the general public in a fixed, rate paying premises. It said that as he provides a service to customers off site and not in the property mentioned, he was not eligible for the grant. The Council said failure to repay the grant would leave it with no option but to take recovery action.
  7. On 9 June, the Council wrote to Mr X seeking recovery of the payments made under the Local Restrictions Grant scheme totally £9,907 in addition to the repayment of the Restart Grant. It said that in total a payment of £17,907 was required to repay the grants.
  8. Mr X wrote to the Council on 10 June in response to all communications from the Council demanding repayment of grants. Mr X said that it had not been explained that any business predominantly delivering its service from outside or in premises rented on an ad-hoc basis would be precluded from the grants. He said that while the majority of the coaching takes place at other locations, the business did directly provide leisure services from the premises. He said he often takes clients back to the office for video analysis of their technique. He said this cannot be done outdoors and so he believed he was eligible. He said admin work is part of the leisure industry and a fundamental part of any business operation. He said that all his services are provided in person and there is nothing that can be done from home. He said that repayment would cause the demise of the business.
  9. The matter was escalated to a manager who responded to Mr X on 24 June. He said that Mr X’s website confirms the business is a sports academy and so provides coaching at his sports ground. He explained that where the main service takes place elsewhere and not in the rated property, there is no eligibility. He said the Council had paid the grants in error and that in accordance with Government rules, it was required to attempt to recover the payments. He explained that if the grants were not repaid, his case would be referred back to the Department for Business, Energy and Industrial Strategy (BEIS). The response said that while the Council could not compel Mr X to repay the grants, it did not know what the BEIS intended to do with such cases.
  10. The Council accepts it paid the grants in error. Internal emails indicate an officer, when awarding the initial grant, believed Mr X was using the premises as an indoor sporting venue. When the Council conducted a review of the grants the use of the premises was checked and this is when the Council’s error was found. There is no suggestion Mr X deliberately misled the Council when applying for the grants.
  11. After realising its error, the Council considered whether Mr X would be entitled to other grants. In particular it considered his entitlement to the Additional Restrictions Grant which is a discretionary grant. This grant was released in phases and Mr X was found to be entitled to three different amounts totalling £5,975. The Council offset this against the amounts it said were overpaid and so is seeking to recover £11,932.
  12. Mr X made a formal complaint to the Council. Its stage two response, dated 19 October 2021, concluded it had incorrectly awarded Mr X £17,097. It said in reaching this view it had carefully considered the decision making process. The Council noted Mr X was awarded £10,000 in April 2020 during the first national lockdown. It said entitlement was because the business received small business rates relief at the premises.
  13. It explained the eligibility criteria for the subsequent rounds of business grant funding changed. It said the Government set criteria which prescribed the type of business which was required to close and was therefore eligible for the grants. It said generally this was non-essential retail, leisure, personal care, sports facilities and hospitality businesses. It said that in addition, the support was aimed predominantly at situations where services were delivered in person to the general public in a fixed, rate paying premises.
  14. The Council explained the grants had been paid in respect of the upstairs office premises. After awarding the grants, officers subsequently reviewed the awards and took the view that the eligible part of his business, ie the sports coaching, was not carried out at the office premises but at the sports ground which is not rated for business rates. The office is predominantly used for administration which is not a use classified as eligible for any of the grants. So the Council decided the office premises were not eligible for the grant funding and that it had been paid in error.
  15. The Council explained why it could pay the ARG in respect of the sports ground even though it was not on the business ratings list. It provided details of the amounts payable as the ARG and that the amount it was seeking to recover had reduced from £17,907 to £11,932. The Council apologised for its error in awarding the grants and explained it was required to take all reasonable and practicable steps to recover these overpayments.

Analysis

  1. Mr X complains about the Council’s decision to recover COVID-19 business grants. He believes he is entitled to the money as he operates a leisure business.
  2. The information provided shows that Mr X‘s leisure business operates from more than one location. The main activity of the business is sports coaching and Mr X acknowledges the majority of this work takes place at the sports ground. The upstairs office is visited by clients and while some video coaching takes place there, this location is mainly used for administration.
  3. Mr X only pays business rates for the upstairs office. At that time he did not pay business rates for the sports ground. So, while the main activity of the business is sports coaching this was mainly carried out at a location that was not on the rating list.
  4. The information provided shows that the error in this case was as a result of action by the Council only. There is no suggestion that Mr X did anything wrong. The Council wrongly assumed the premises were an indoor sports facility and awarded the grants on that basis. This was fault. I note that when the Council realised its error, it wrote to Mr X in a neutral manner asking him what activities took place at the upstairs office. Based on the information provided by Mr X, the Council decided he was not eligible for the grants and sought to recover the monies.
  5. I am satisfied the Council has given proper consideration to Mr X’s eligibility in this case. Once it realised its error, it sought confirmation of activities from Mr X and then based its decision to recover on this information, the ratings list description and information on Mr X’s website. The Council subsequently considered Mr X’s entitlement to other grants, particularly the ARG, and awarded him the maximum entitlement which it offset against the amount it was seeking to recover.
  6. While there was fault in the initial decision to award the grants, there is no fault in the subsequent actions in seeking to recover the amounts paid in error. I am satisfied the Council has fully considered Mr X’s circumstances, correctly applied the guidance, explained its decision to Mr X, apologised for its error and followed government guidance in seeking to recover the money. The Council has also explained that if the money is not repaid it will have to refer the matter back to the BEIS and it may take further action. While I appreciate Mr X does not agree with the Council’s decision, I am satisfied there is no fault in actions leading to that decision and so I cannot criticise it.

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Final decision

  1. I will now complete my investigation. While it was fault by the Council to initially pay the grants, there is no evidence of fault in it seeking to recover the amounts paid.

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Investigator's decision on behalf of the Ombudsman

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