The Ombudsman's final decision:
Summary: Mr X complained about the Council’s failure to properly assess his claims for small business rates relief and issue timely and accurate business rates bills. We found fault by the Council in its handling of Mr X’s liability for business rates, which led to backdated bills of about £14,000. What happened caused Mr X avoidable shock and distress for which the Council agreed to apologise and provide financial redress. The Council also agreed to arrange an affordable payment plan with Mr X for the outstanding business rates.
- Mr R, for Mr X, said the Council’s errors led it to issue Mr X with backdated business rates bills for about £14,000. The Council also refused to apply business rates legislation in a way that would have reduced the bill. Receiving such a large and unexpected bill caused Mr X considerable stress and added to the financial pressures his business already faced due to COVID-19. Mr R wanted the Council to accept it made a mistake; apologise; and reduce the backdated bill.
The Ombudsman’s role and powers
- 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)
- 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)
- We may investigate complaints made on behalf of someone else if they have given their consent. Mr X has given his written consent to Mr R to represent him in making this complaint. (Local Government Act 1974, section 26A(1), as amended)
- We may investigate matters coming to our attention during an investigation if we consider that a member of the public who has not complained may have suffered an injustice as a result. (Local Government Act 1974, section 26D and 34E, as amended)
- 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)
How I considered this complaint
- I have:
- Considered the complaint and supporting papers provided by Mr R.
- Talked to Mr R about the complaint.
- Asked for and considered the Council’s comments and supporting papers about the complaint.
- Shared the Council’s response to the complaint with Mr R.
- Shared a draft of this statement with Mr R and the Council and considered the responses I received before making a final decision.
What I found
- Business rates are a local tax on business premises. The Valuation Office Agency keeps the business rating list and decides if a property should be rated and its rateable value. Councils are responsible for billing and collecting business rates.
- A business can get small business rates relief (SBRR) if it occupies one property depending on its rateable value. If the rateable value is £12,000 or less, the business will receive 100% relief and so pay no business rates. A business may still get SBRR if it uses more than one property. However, to keep the SBRR, the other properties must have a rateable value of less than £2,900 and the total rateable value of all the properties must not be more than £19,999. Before 1 April 2017, the relevant rateable value thresholds were £6,000, £2,600 and £17,999 respectively. (I shall use ‘threshold’ in this statement when referring to any of these relevant rateable values.)
- Legal rules (The Non-Domestic Rating (Reliefs, Thresholds and Amendment) (England) Order 2017) refer to business rates decisions where a ratepayer occupies more than one property. One rule (‘the Rule’) says, in summary, that:
‘In determining whether the ratepayer occupies only one property (“property A”), the ratepayer's occupation of any other property (“property B”) shall be disregarded where the ratepayer’s occupation of property B started on a date after that ratepayer started to occupy property A.’
- Since 1 April 2014, a business gets 12 months transitional relief where its occupation of a further property does not comply with the relevant thresholds.
- Mr X runs a business that expanded leading to it occupy three properties in the Council’s area, which I shall refer to as Property One, Two and Three. Mr X’s business first occupied Property One and Mr X received SBRR on Property One.
- In 2013, Mr X started to occupy a second property, Property Two that he used for storage. Mr X, in the company’s name, applied for SBRR on Property Two, whose rateable value was less than the relevant threshold. The application form said Mr X’s business occupied Property One. The Council awarded 100% SBRR and started to bill Mr X’s company for business rates showing £0.00 payable on Property Two.
- About two years later, Mr X started to use Property Three for storage. In communicating with the Council, Mr X referred to his business also occupying Properties One and Two. Mr X then applied, in the company’s name, for SBRR on Property Three, whose rateable value was more than the relevant threshold. The Council awarded 100% SBRR and started billing Mr X’s company for business rates showing £0.00 payable on Property Three.
- In 2020, Mr X applied to the Council for a COVID-19 business grant. In handling the application, the Council noticed it might have wrongly awarded SBRR on all three properties used for Mr X’s business.
- In the correspondence that followed, Mr X produced legal papers to show he had the right to occupy Properties Two and Three in his own name (as a sole trader). The Council changed its records to show Mr X occupied Properties Two and Three and his company occupied Property One. The Council confirmed that Property One, occupied by the company, had, and continued to have, 100% SBRR.
- The Council then issued business rates bills to Mr X at his home address for Properties Two and Three dating back to 2013 and 2015 respectively. In calculating the bills, the Council, applying its interpretation of the Rule, treated Property Two as ‘property A’ and Property Three as ‘property B’. This led the Council to award some SBRR on Property Two. But the rateable value of Property Three was more than the relevant threshold for a further property. So, after applying 12 months transitional relief, the Council’s bills for Property Two included no SBRR from late 2016. The bills for Property Three also had no SBRR. The total amount billed for Properties Two and Three was about £14,000.
- Mr R, acting for Mr X, said the Council should, and could, legally ‘swop’ the bills for Properties Two and Three. This would mean the Council applied 100% SBRR to Property Three, leaving Mr X to pay business rates on Property Two. As Property Two had a rateable value less than the relevant threshold for a further property, such an approach would reduce Mr X’s total backdated bill to about £3,000. Mr R said the Council was responsible for what had happened as Mr X had told it about occupying Properties One, Two and Three. And switching the bills was both a simple administrative exercise and a sensible supportive step to help a local business during the COVID-19 emergency.
- The Council told Mr X it was satisfied it had correctly applied the relevant legal rules. Mr X had occupied Property Two before Property Three and so Property Three was the ‘additional’ property. As the rateable value of Property Three was greater than the relevant threshold for a further property neither it nor, after 12 months transitional relief, Property Two qualified for SBRR. The Council said it did support local businesses but had to act within the law. The Council agreed to reconsider its position if Mr R provided further evidence about first occupation of Properties Two and Three or that supported his interpretation of the law.
The Council’s response to the Ombudsman
- The Council accepted it should have followed up Mr X’s 2013 and 2015 information about his business occupying more than one property. It believed the failure to do so was due to human error as its procedures included routine checks that should have identified the issue. The Council apologised for its omission. It also pointed out that Mr X had not provided information in 2013 or 2015/16 to show he and not his business was occupying Properties Two and Three. The Council said, while it did not excuse its errors, such information might have led it to review and amend the relevant business rates accounts much sooner than 2020/21.
- The Council also said it did not regularly review SBRR awards but accepted it should have had procedures in place to do so. If it had regularly reviewed SBRR awards, this might have led it to identify and amend Mr X’s business rates accounts sooner than 2020/21.
- The Council recognised it had not met its customer service standards in dealing with Mr X’s case and offered its apologies. The Council also said it would write off outstanding business rates more than six years old and apologised for not doing this immediately.
- The Council, in learning from Mr X’s complaint, said it had acted to prevent a recurrence of what had gone wrong by:
- Reviewing all SBRR awards during 2020 and introducing an annual review procedure.
- Reminding its business rates officers of the legal rules for SBRR.
- Running an added monthly report that checks for multiple SBRR entries.
- Introducing monthly sampling to check and identify any case work issues and any training needs for officers.
- Recruiting an extra officer to work in its business rates team.
- The Council said its 2020 review of all SBRR awards had identified two other cases where it had wrongly awarded SBRR to more than one property.
- It is not my role to decide if, and what, SBRR the Council should award on Properties Two and Three. My role is to consider how the Council handled Mr X’s contacts about SBRR, which led it to issue business rates bills for payment of about £14,000 in 2020/21.
- The information provided by Mr X in 2013 and 2015/16 about Properties Two and Three referred to his company occupying more than one property. In fact, the company was not occupying Properties Two and Three, the legal occupant was Mr X. However, the evidence shows the Council did not know Mr X was the occupier until 2020. But the available evidence does show Mr X had put the Council on notice that he/his company were occupying more than one property from 2013. The Council has now admitted it was at fault in not identifying and clarifying the properties Mr X and his business were occupying in both 2013 and 2015/2016. I agree: there was fault here.
- If the Council had sought more information from Mr X in 2013, it is more likely than not to have clarified his occupation of Property Two in 2013. And, if the Council had sought similar clarification in 2015, it is likely to have established Mr X’s occupation of Property Three by early 2016. I therefore find the injustice to Mr X arising from the fault identified at paragraph 26 is that he was denied timely annual business rates bills for Properties Two and Three. People usually find timely, and expected, bills easier to manage and deal with than unexpected, backdated bills for substantial amounts. Receiving such significant backdated bills, especially given the pressures facing many businesses in 2020 arising from the COVID-19 emergency, would have caused Mr X shock and added avoidable distress.
- However, Mr R also challenges the amounts the Council has billed Mr X. Mr R and the Council disagree about the interpretation and application of the relevant laws for deciding whether SBRR is applied to Property Two or Three. This is important as when a business occupies more than one property, SBRR is only available to one of them. And, here Property Three’s rateable value is both higher than Property Two’s and exceeds the threshold relevant to SBRR decisions where a business occupies more than one property. Mr X’s backdated bill would be significantly greater if SBRR was awarded to Property Two (about £14,000) rather than Property Three (about £3,000). So, the approach taken has significant financial implications for Mr X.
- The Council, in support of its approach, points to the Rule and that Mr X occupied Property Two before Property Three. The Council’s position is in line with a common sense reading of the Rule. However, if Mr R disputes the Council’s interpretation of the Rule and believes it does not stop the Council from awarding SBRR to Property Three, that would be a disputed point of law. The courts, not the Ombudsman, have powers to determine disputes about the interpretation and application of legal rules. I cannot therefore resolve this point. And I do not have evidence on which I could properly find the Council was at fault in its approach, which led it issue Mr X with backdated bills totalling about £14,000.
- To put right the injustice to Mr X arising from the fault I have identified at paragraph 26, the Council agreed:
- To write to Mr X to apologise for its failure to properly check and assess and later review his applications for SBRR on Properties Two and Three.
- To write off outstanding business rates on Properties Two and Three that it billed as payable for any period before 1 April 2016.
- To pay Mr X £750 in recognition of the avoidable shock and distress caused by its failure to assess his business rates liability in a timely and thorough manner. (The £750 will be applied to reduce Mr X’s outstanding business rates liability.)
- It would agree a bespoke plan with Mr X for payment of outstanding business rates on Properties Two and Three between 1 April 2016 and 31 March 2021. Such plan to provide for payments affordable to Mr X and be open to review at Mr X’s request should his financial circumstances change.
- Not to take formal enforcement action against Mr X for unpaid business rates on Properties Two and Three due from 1 April 2016 to 31 March 2021 while negotiating a payment plan and while Mr X is complying with its agreed terms.
The Council agreed to complete the steps at bullet points 1 to 3 within 30 working days, and the step at bullet point 4 within three calendar months, of the date of this decision.
- In recognition of the Council identifying two other cases where it wrongly applied SBRR to more than one property, it agreed to review both cases in the light of the recommendations at paragraph 30.
- The Council also agreed to send the Ombudsman evidence it had complied with the all the recommendations at paragraphs 30 and 31 within four calendar months of the date of this decision.
- The Council had acted to address the wider service issues raised by Mr X’s complaint (see paragraph 23). I therefore make no recommendations now for service improvements.
- I completed my investigation, finding fault causing injustice, on the Council agreeing the recommendations set out at paragraphs 30 to 32.
Investigator's decision on behalf of the Ombudsman