The Ombudsman's final decision:
Summary: Mr X complained the Council made a refund of business rates on a rented unit to the landlord even though Mr X is the registered rate payer. The Council acknowledges it should have contacted Mr X before paying the refund to the landlord’s bank account even though this was the account from which the business rates were paid. The Council has offered to now make the payment to Mr X.
- Mr X complains the Council made a refund of business rates on one of his rented units to his landlord even though he is the registered rate payer.
- Mr X says he has been deprived of money he was entitled to.
What I have investigated
- This complaint is focussed on the repayment of a business rates after Mr X vacated a business unit. I explain at paragraph 24 below the matters I have not investigated as part of this complaint.
The Ombudsman’s role and powers
- 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)
- 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
- 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 invited their comments. Neither Mr X nor the Council provided any comments on the draft decision.
What I found
- Mr X rented two separate units within a larger business centre, unit A and unit B. The property is owned by the Council but operated by a separate management company. All the units within this business centre are separately listed for business rates. While the business rates were listed under the name of the occupier of each unit, the payments were included in the rent paid to the management company which then paid the business rates on behalf of the tenants to the Council.
- The Council awarded Mr X’s business small business rates relief (SBRR) on unit A in February 2006. The rules of SBRR mean that it cannot be applied to two properties used by the same business. The application of SBRR reduces the rate liability for the business. However, Mr X says that as he paid the business rates as part of his rent, this reduction was not passed onto him by the management company.
- In March 2020, in response to the COVID-19 pandemic the government created schemes for councils to pay grants to small businesses. It also extended business rates discount for certain businesses. The Council awarded this extra rate relief to Mr X on unit A which resulted in a credit on his business rates account. The Council paid the refund, along with the business grant, directly to Mr X because it had his bank account details in respect of the grant application. The Council says it important to pay the grants quickly and so it was administratively expedient to make the payments together.
- Mr X vacated unit B on 31 August 2020. As Mr X had been paying the business rates for this unit, a credit was created on this account and so a refund was made. The refund was made in the name of Mr X’s business and was credited to the bank account the payments had been made from. The bank account was in the name of the management company. Mr X says the management company has not passed on the refund to him.
- Mr X made a formal complaint to the Council on 5 October 2020. The complaint was made along with other tenants at the business centre and was generally about the failure of the management centre to pass on refunds to tenants. The complaint said the Council had made refunds to the management centre knowing it is not the named ratepayer.
- The Council responded to the complaint on 23 December 2020. It said that where a business rates overpayment is identified, it has been the practice to refund to the bank account which made the payment. It said this was to meet its money laundering policy. It acknowledged that payments to Mr X for units A and B had been paid to two different accounts. It accepted there was a “weakness” in its procedures and that it should be discussing any refund with the rate payer before making any payment. It said it would be changing its procedures as a consequence of Mr X raising this matter with it. The Council also offered to discuss the refund in respect of unit B with the management company if Mr X gave his permission.
- Mr X contacted the Council again on 8 February 2021. He had been in contact with the Ombudsman, and we had advised him to ensure he used all stages of the Council’s complaints process. Mr X again raised the issue that credits of business rates should have been made to him as the liable ratepayer and not the management company.
- The Council responded on 29 July 2021. It apologised for the delay saying this was due to unprecedented workloads as a result of the COVID-19 pandemic. The Council said it was satisfied the business rates accounts for units A and B were set up correctly in his name. It said the arrangement of who was actually paying the bills and therefore who benefitted from the reduction in the bill is outside the administration of the SBRR process. It said it had made the refund to the account which paid the business rates and suggested Mr X contact the management company if he considers he is due a refund.
- Mr X complains that a refund of a business rate credit was paid to his landlord even though he is named on the business rates account and is the liable person.
- The information provided shows that Mr X was named as the liable party for business rates at two units within a business centre. I am satisfied it was correct for the business rates to be in Mr X's name.
- Mr X has a tenancy agreement with the management company that runs the business centre. While I have not seen a copy of this tenancy agreement, it is my understanding the rent payments are inclusive of business rates and other utility costs. I am satisfied Mr X was aware of this arrangement when he signed the tenancy agreements.
- Due to the COVID-19 pandemic the government introduced schemes to help businesses and Mr X was a recipient. Mr X provided the Council with his bank account details to enable it to pay him the small business grant. The Council added the business rates refund for unit A to this payment and made it directly to Mr X. However, for unit B the refund was made to the management company.
- I am not persuaded it was fault for the Council to refund the business rate credits in the way that it did. For unit A it was making another payment to Mr X and so it was convenient to add on the business rates credit and make just one payment. Equally, I do not consider it was necessarily fault to refund the credit for unit B back to the account the payments came from.
- The Council accepts that legally any refunds are owed to the person named on the business rates account. It therefore acknowledges that it should check with the liable party before paying any refund to a third party. I welcome the fact it has changed its procedure to ensure it make contact with the liable party in future.
- It seems to me that if the Council had contacted Mr X about the refund for unit B before making the payment that Mr X would have asked for it to be paid directly to him. I therefore consider the Council was at fault for not doing this. In response to my enquiries the Council has offered to issue another refund to Mr X. It will then seek to recover the money from the management company. I consider this is an appropriate way to resolve this complaint.
- Within one month of my final decision the Council will make a payment of £349.69 to Mr X which is the amount of the business rates refund he was due for unit B.
- I have completed my investigation with a finding of fault for the reasons explained in this statement. The Council has agreed to implement the actions I have recommended. These appropriately remedy any injustice caused by fault.
Parts of the complaint that I did not investigate
- Mr X also complained about the fact the management company charged the full business rates in the rent amount and then didn’t pass on any rate relief to the businesses. I consider this is a private contractual matter between the management company and the individual tenants. In taking this view, I note the Council owns the building but I am not persuaded this means we should investigate what is a private contractual matter.
Investigator's decision on behalf of the Ombudsman