Summary: There was no fault in the Council’s decision to treat two companies as linked enterprises, for the purposes of various COVID-19 business support grant schemes. We have therefore completed our investigation.

The complaint

1. I will refer to the complainant as Mr D.
2. Mr D complains about how the Council handled COVID-19 business support payments for two companies he represents. In particular, he complains the Council decided to treat the two companies as linked enterprises, rather than separate businesses.

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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 an organisation’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. If we are satisfied with an organisation’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)
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”.

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How I considered this complaint

6. I reviewed Mr D’s correspondence with the Council, the Council’s policies on its discretionary grant schemes, and the Government guidance on mandatory grant schemes.
7. I also shared a draft copy of this decision with each party for their comments.

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What I found

8. Mr D is the director of two companies, which I will refer to as Company 1 and Company 2. The two companies both operate in the same industry and share a business premises.
9. On 4 May 2021, Mr D made a complaint to the Council about decisions it had made on the provision of COVID-19 business support to both companies. His complaint covered four points:

• the Council’s refusal of a grant under the retail, hospitality and leisure (RHL) scheme for Company 2;
• that the Council had decided to treat Companies 1 and 2 as linked enterprises, rather than separate businesses, and therefore refusing to pay grants to both;
• that Council officers had “misappropriated” public funds; and
• that Company 2 had been “discriminated against”.

10. The Council responded on 21 May. It explained the background to the RHL grant scheme, and said that, although Company 1 was registered for business rates on the scheme’s qualifying date of 11 March 2020, it “did not meet the Government’s definitions of an RHL business” and therefore did not qualify for the scheme.
11. The Council gave a breakdown of the various grant payments which it had made to both companies. It said, due to the combined total of payments, it could not grant the most recent application made by Mr D for a discretionary grant for Company 1.
12. The Council went on to explain it could provide separate grants for businesses which shared properties, but only where they were not linked enterprises. The Council said, by the European Commission’s definition, Companies 1 and 2 were linked enterprises, due to their shared ownership, director control and activities; and in the absence of any other guidance from the Government it had decided still to rely on this definition.
13. The Council said it was satisfied there was no evidence officers had misappropriated public funds, or any lack of due diligence on the Council’s part. It rejected Mr D’s claim it had discriminated against Company 2.
14. Mr D escalated his complaint to stage 2 of the Council’s procedure, and the Council responded on 16 June.
15. The Council explained that Company 1 did not fall into the RHL scheme eligibility criteria, because it required that a business’s premises be used “for the sale of goods to visiting members of the public”. As Company 1 did not use its premises for this purpose, it did not qualify for the expanded retail discount (ERD) scheme, which meant, in turn, it did not qualify for the RHL scheme.
16. Notwithstanding this, the Council acknowledged Mr D’s original complaint had been about Company 2, not Company 1.
17. The Council said it understood that, as of August 2020, Mr D had revised the business model for Company 2, which meant customers now visited the premises. For this reason, the Council had retrospectively applied the ERD scheme, meaning the business premises now had a 100% rates discount. However, Company 2 still did not qualify for the RHL scheme, because it was not eligible for the ERD on 11 March 2020, as required.
18. The Council also pointed out that, as Company 1 also no longer had a rates liability (given it shared its premises with Company 2), it would have been within its rights to review Company 1’s entitled to some of the discretionary grants it had received, for which having a rates liability was a qualifying criterion. However, it had made a discretionary decision not to do this.
19. The Council set out a table showing the different grant payments it had made for both companies. It had explained that, due to their status as linked enterprises, it could not pay the same grant to each business. The Council reiterated its reliance on the European Commission definition of linked enterprises.
20. The Council again rejected Mr D’s allegations that officers had misappropriated funds, or that Company 2 had been discriminated against. The Council pointed out it had retrospectively granted Company 2 relief under the ERD scheme, and without compromising the discretionary grant payments made to Company 1.
21. Mr D referred his complaint to the Ombudsman on 4 February 2022.

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Legislative background

Small business grants and retail, hospitality and leisure grants

22. In March 2020, the government created schemes for councils to pay grants to small businesses and retail, hospitality and leisure businesses. This was because the COVID-19 restrictions affected so many of them.
23. A business’s right to a grant depends on its rateable value on the business rating list and its eligibility for certain business rate reliefs on 11 March 2020. Government guidance states later changes to the rating list, even if they are backdated to 11 March 2020, do not entitle a business to a grant. A council can make an exception if, on 11 March 2020, it already had good reason to believe the rating list was inaccurate for a particular address or business.
24. The Valuation Office Agency (VOA), not the Council, compiles the rating list and decides on liabilty for business rates and rateable values.

Discretionary grants

25. The government has given councils some funding for discretionary grants to businesses. Councils should have a policy on making these discretionary grants.

Expanded retail discount

26. In March 2020, the Government announced that all retail businesses would receive 100% relief from business rates for the tax year 2020/21. In April, it then published guidance for councils on how to apply this relief.
27. At paragraph 10, the guidance said:

“Properties that will benefit from the relief will be occupied hereditaments that are wholly or mainly being used:

1. as shops, restaurants, cafes, drinking establishments, cinemas and live music venues,
2. for assembly and leisure; or
3. as hotels, guest & boarding premises and self-catering accommodation.”
1. Paragraph 11 of the guidance clarified each type of business must be open “to visiting members of the public” to qualify.

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Analysis

29. In referring his complaint to the Ombudsman, Mr D raised two points: the Council’s decision to treat the two companies as linked enterprises, with the consequence it did not make separate grant payments to each; and its refusal to accept the “prior formation date of 2018” for Company 2. I shall address each point in turn.

Decision to treat the companies as linked enterprises

30. The Ombudsman’s role is to review how councils have made their decisions. We may criticise a council if, for example, it has not followed an appropriate procedure, failed to take account of relevant information, or not properly explained its decision. However, we are not an appeal body. We do not make operational or policy decision on councils’ behalf, and we cannot direct councils to disregard their own professional judgement if it was made properly. We do not uphold complaints simply because somebody disagrees with something a council has done.
31. In this case, the Council has explained that, in the absence of any other guidance from the Government, it has relied on the European Commission’s definition of linked enterprises. As Company 1 and 2 are run by the same management, from the same premises and operate in the same field, this means they are linked enterprises by this definition.
32. Under the Council’s policy, this means it will not pay separate grants for each company. This was a decision it was entitled to make, and I have no grounds to criticise it.
33. I am conscious that, for the mandatory schemes (where scheme policy was set by the Government, not the Council) the guidance appears silent on this issue. However, under such circumstances, I do not consider it fault for the Council to apply its own interpretation, provided it explains this properly, which I am satisfied it has here.
34. I should say that, and although I do not find fault for this reason, it is not clear to me why the Council paid some grants to Company 1, and others to Company 2, rather than simply paying them all to one or the other. For ease of understanding, if nothing else, this may have been preferable.
35. I note Mr D accuses Council officers of misappropriating public funds and of discriminating against Company 2.
36. Although I appreciate Mr D is dissatisfied with the Council’s decisions here, he has adduced no evidence at all that officers are guilty of ‘misappropriation’. That the Council has declined to pay grants Mr D considers he is due does not mean officers have stolen money. Either way, as this is a criminal offence, Mr D should contact the police about if it something he wishes to pursue. This is not a matter for the Ombudsman to investigate.
37. I also do not consider there is any evidence to support the charge of discrimination against Company 2. On the contrary, the Council’s evidence shows it has paid thousands of pounds in grant money to Company 2, and also retrospectively applied the ERD, which it was not required to. It is not possible to consolidate these facts with Mr D’s claim of discrimination, and so I will not consider this point any further.
38. I find no fault in this element of Mr D’s complaint.

Decision not to accept the “prior formation date of 2018” for Company 2

39. As I understand it, Mr D complains here about the Council’s decision not to pay Company 2 an RHL grant. However, I consider this has arisen from a misunderstanding.
40. The RHL grant scheme had several qualifying criteria. These included that the business in question would have been eligible for the ERD scheme on the qualifying date of 11 March 2020, had the scheme existed at that point.
41. Although the Council agreed to retrospectively apply the ERD to Company 2, once its business model had changed to meet the qualifying criteria, this did not alter the fact the company had not been eligible for it on the qualifying date. This in turn meant it was not eligible for the RHL grant scheme. That the company may have been founded in 2018 is not relevant.
42. I will add that it is positive the Council decided to retrospectively apply the ERD to Company 2, which, as I understand it, it was not required to do. It is also positive the Council decided not to review its decision to pay discretionary grants to Company 1, despite the fact it no longer qualified for these after the removal of its business rates liability. Again, it is not possible to consolidate these facts with Mr D’s claim of discrimination.
43. I find no fault in this element of Mr D’s complaint.

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Final decision

44. I have completed my investigation with a finding of no fault.

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Investigator's decision on behalf of the Ombudsman