Summary: There was no fault by the Council, in its handling of a business rates matter. The complainant did not notify the Council he had occupied an additional unit, which ultimately explains the delay in his being billed correctly. But the Council was at fault for its poor complaint handling, and it has agreed to apologise for this.

The complaint

1. The complainant, to whom I will refer as Mr F, says the Council delayed informing he was due to pay business rates on an industrial unit he was renting. This meant he received a backdated bill, which he could not afford to pay. Mr F also complains about how the Council handled his complaint on the matter.

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The Ombudsman’s role and powers

2. 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)
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

4. I reviewed the Council’s correspondence with Mr F, and also with the Valuation Office Agency and another tenant on the same industrial site.
5. I also shared a draft copy of this decision with each party for their comments.

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What I found

6. Mr F owns a small business. His business operates from a unit on an industrial site. He qualifies for small business rates relief (SBRR) on this unit.
7. In March 2017, the tenant of the neighbouring unit sub-let an area of his unit to Mr F, for storage. I will refer to this person as ‘the Tenant’. Mr F says he has paid the Tenant a monthly rental sum since then, with the Tenant being responsible for paying all relevant bills.
8. On 5 June 2019, the Council sent Mr F business rates bills for the sub-let unit, backdated to March 2017. Including the bill for the financial year 2019-20, this totalled approximately £2500. It also enclosed an SBRR application form for the sub-let unit, which Mr F completed and returned.
9. On 25 June, the Council wrote back to Mr F. It informed him he could not claim relief on the sub-let unit, as he was already receiving it for his main unit. It enclosed further copies of the business rates bills.
10. On 10 July, Mr F emailed the Council. He explained his occupation of the sub-let unit, and the arrangement he had with the Tenant. He asked the Council to update its records, to show the Tenant as liable for the business rates.
11. The Council replied on 18 July. It explained it was the occupier of the unit who was liable to pay the rates, which in this case was Mr F, and reiterated he could not claim relief on the unit.
12. Mr F raised a stage 1 complaint with the Council on 23 July. He explained again the arrangement he had with the Tenant. Mr F said he had belatedly realised he had signed a lease form for the unit, in the belief this was simply a formalisation of the arrangement. However, he complained the Council had waited more than two years to bill him for the business rates, and said he would have ended the arrangement immediately had he realised he would be liable for rates on the unit. Mr F said he had now given notice to the Tenant to end the arrangement.
13. The Council replied on 29 July. It accepted there had been a delay in issuing the bills, but said this was because it had taken “considerable time” to clarify the situation with the some of the units on the site. The Council said it had also been inaccurate information in the past about this.
14. The Council acknowledged the difficulty of suddenly receiving an unexpected bill, and offered Mr F an opportunity to pay in instalments. It also explained that, if he wished to challenge his liability for the rates, he could wait to be summonsed to the Magistrates’ Court for a liability hearing.
15. Mr F wrote to the Council on 1 August, asking for his complaint to be escalated to stage 2. He again criticised the Council’s delay in informing him he was liable to pay the rates. Mr F offered to pay approximately one-third of the bill in “full and final settlement”, which he said he considered a fair amount because of the Council’s delays.
16. Mr F chased the Council for a response on 17 September.
17. The Council replied on 3 October. It said it could not resolve the matter through its complaint procedure, because disputes about liability for business rates were a matter for the Magistrates’ Court, as its previous email had explained. The Council asked Mr F to confirm the date he had vacated the sub-let unit.
18. Mr F responded on 11 October. He complained about the significant delay in the Council’s response, and asked it to confirm the email of 3 October was its formal stage 2 response, so that he could approach the Ombudsman.
19. Mr F emailed the Council again on 31 October to ask for a response. The Council replied quickly to say it would deal with the matter as a stage 2 complaint, and that it would aim to reply substantively by the end of the following week.
20. The Council issued its formal stage 2 response on 8 November, apologising for the delay in doing so. However, the Council maintained its position – the delay in issuing the bills had arisen because of a lack of clarity and the receipt of inaccurate information. If Mr F wished to dispute his liability, the correct route to do so was through the Magistrates’ Court, to which he would likely be summonsed in January 2020.
21. The Council said it could not accept Mr F’s offer to pay a third of the bill, although it repeated its offer to arrange a payment plan. But it did not accept it had acted improperly, and it was for Mr F to approach the Tenant if he felt he had misled him.
22. Mr F referred his complaint to the Ombudsman on 20 November.

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Legislative background

Business rates

23. Business rates (also known as national non-domestic rates [NNDR]) is a local tax on business premises. The Valuation Office Agency (VOA) keeps the business rating list and decides if a property should be rated. The VOA also decides the rateable value of the premises, and the date each premises should enter and leave the list. The local authority then collects business rates, calculated on the rateable value of the relevant premises.
24. A dispute about the VOA’s decision can be appealed to the Valuation Tribunal. Disputes about whether a particular person or body should be liable for business rates are heard in the Magistrates’ Court.

Small business rates relief

25. If a business occupies a single premises, which has a rateable value below a set level, it can claim SBRR. This means it will not pay any business rates.

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Analysis

26. Mr F considers the Council should have notified him of his liability for business rates on the sub-let unit immediately he occupied it. Had it done so, he says he would have given notice to vacate the unit, meaning he would have only had to pay approximately one month’s worth of rates.
27. The Council says the delay arose because it did not have clear information about the occupation of units on the estate, and because it had previously been supplied with inaccurate information.
28. I asked the Council to explain its understanding of the situation on the estate before 2019. It said it believed the Tenant was responsible for the sub-let unit, and it was only in March 2019 it became aware of Mr F’s occupation. This came about when the Tenant called the Council on 1 March.
29. The Council has provided a full set of its correspondence with the different relevant parties from the beginning of 2019. This shows, in January 2019, it wrote to the Tenant enclosing business rates bills for the sub-let unit. It said it had recently undertaken a review of SBRR, and had established the Tenant was in occupation of this unit, and another.
30. On 1 March, the Tenant emailed the Council, following a phone call earlier in the day. The Tenant provided some information to show that he and Mr F were in shared occupation of the sub-let unit.
31. Between then, and May when it first wrote to Mr F, the Council engaged in a series of correspondence with both the Tenant and the Valuation Office Agency. The purpose of this was to clarify which units were in occupation by whom, and where exactly the units were on the estate.
32. The discussion culminated in the Tenant confirming Mr F was in occupation of an area of the sub-let unit, illustrated on a plan which had been circulated during the exchange. The Council then wrote to Mr F, as described in paragraph 8 onward.
33. It is not clear from this information why the Council did not contact the Tenant before January 2019. I understand this was triggered by the SBRR review; but this fact, in isolation, does not explain why the Council had not attempted to bill the Tenant before then. Had it done so, it is arguable the truth of the situation would have become clearer sooner.
34. However, I cannot accept Mr F’s argument the Council should have notified him of his liability when he occupied the unit. It is evident the Council knew nothing about this until the Tenant contacted it in March 2019. There was no other mechanism by which the Council could have known about the sub-letting arrangement. The onus was on Mr F, and/or the Tenant, to contact the Council, not the other way round.
35. Given the complexity of the situation, I appreciate Mr F may not have understood that occupying the additional unit would trigger a liability for business rates. But again, I cannot attribute this to fault by the Council. It is a business’s own responsibility to ensure it complies with the law.
36. So, while it remains unclear to me why the Council did not act before 2019, I do not consider this outweighs Mr F’s own inaction. I note, in particular, Mr F was claiming relief on his main unit, and so I consider he should have been sufficiently familiar with the SBRR rules to know he might be liable for rates if he occupied an additional unit, even in part.
37. I appreciate, also, Mr F understood the Tenant would pay all bills out of the monthly rent. It may be Mr F was led to believe this included any business rates. But, as the Council says, this is a matter for him to take up with the Tenant. I cannot find fault by the Council because Mr F was misled by a third party.
38. On balance, therefore, the evidence does not allow me to conclude the Council was at fault here. And even if I was satisfied the Council should have acted earlier, I would not consider this caused Mr F an injustice, as he could also have avoided the situation by being proactive.
39. Mr F also complains about the handling of his complaint.
40. The Council responded to Mr F’s stage 1 complaint in six days, which is very prompt. I am also satisfied the Council’s response dealt with the points Mr F raised adequately, although I recognise he would disagree with this.
41. However, after requesting escalation to stage 2 on 1 August, Mr F received nothing further until 3 October. This was a substantial delay.
42. To make matters worse, the response of 3 October was to refuse escalation to stage 2, and to advise Mr F to argue his case in the Magistrates’ Court.
43. If Mr F had been disputing his liability to pay the business rates, I might consider this appropriate. The Ombudsman would generally not expect such matters to be addressed through the Council’s complaint process, when there is a defined route of redress set down in law.
44. But it is difficult to see how the Council could interpret Mr F’s complaint as an argument about liability. He was not suggesting he was not liable; he was complaining the Council had not told him about his liability sooner. This is not something the Magistrates’ Court would make findings on, and so it was entirely appropriate for it be addressed via the complaints process instead.
45. I must acknowledge, once the Council had accepted this point, it again dealt with the complaint very quickly and appropriately. But I am satisfied the long delay in accepting the complaint at stage 2, and the initial failure to recognise it should do, is fault. And, given Mr F’s professed distress at the matter, I consider this fault caused him an injustice.
46. I do not consider this injustice warrants a financial remedy. Although Mr F had an undue wait for the Council to respond to his complaint, it made no difference to the outcome. He had already given notice to end the sub-letting arrangement by this point, and so the delay did not cause him any additional expense.
47. But I do consider Mr F should receive an apology from the Council for its poor handling of his complaint. I do note the Council apologised, in the stage 2 response, for the delay; but I am not satisfied this adequately addresses the fault I have found here, or the injustice it caused Mr F. A dedicated and formal letter of apology remains appropriate.

Agreed action

48. Within one month of the date of my final decision, the Council has agreed to write a formal letter of apology to Mr F for the poor handling of his complaint.

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Final decision

49. I have completed my investigation with a finding of fault causing injustice.

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Investigator's decision on behalf of the Ombudsman