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London Borough of Haringey (21 008 103)

Category : Benefits and tax > Other

Decision : Upheld

Decision date : 18 Mar 2022

The Ombudsman's final decision:

Summary: Mr X complained the Council incorrectly applied a retail discount to his company’s business rates account. The Council was at fault. It incorrectly applied the discount on the account, then billed Mr X’s company without proper communication and then withdrew an offer to cancel some of the debt after Mr X had made a substantial payment. The Council has agreed it will pay Mr X £300 to acknowledge the distress and frustration this caused him.

The complaint

  1. Mr X complained the Council applied a retail discount to his company’s business rates account in error for two financial years and then issued it with a bill demanding the discounted money back. Mr X said the Council financially misled him and the company. He wants the Council to offer him a discount on the money he and his company owes as a remedy.

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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. 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. I considered the information provided by Mr X.
  2. I spoke with Mr X.
  3. I considered the information provided by the Council.
  4. I considered our ‘Guidance on Remedies’.
  5. Mr X and the Council had the opportunity to comment on the draft version of this decision. I considered their comments before making the final decision.

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What I found

Retail business rates relief

  1. Business Rates are a local tax on business premises. The Valuation Office Agency (VOA), part of central Government, keeps the business ratings list.
  2. In 2018, the Government announced a business rates discount for eligible retail businesses to apply for the years 2019/20 and 2020/21. In response to the COVID-19 pandemic, the Government increased the discount to 100% for 2020/21. The ‘Business Rates: expanded retail discount 2020 to 2021: coronavirus response - local authority guidance’ set out which businesses qualified and did not qualify for the retail discount. The guidance set out that businesses which did not qualify for the retail discount included:
    • Financial services (e.g., banks, building societies, cash points, bureaux de change, short-term loan providers)
    • Medical services (e.g., vets, dentists, doctors, osteopaths, chiropractors)
    • Professional services (e.g., solicitors, accountants, insurance agents/ financial advisers)
    • Post office sorting offices

What happened

  1. Mr X works for an accountancy firm which operates from a business premises. In March 2019, the Council issued Mr X’s company a business rates bill for the year 2019/20. The bill showed a retail discount was subtracted from the amount of payment due. The following year in March 2020, the Council issued another business rates bill to Mr X’s company for 2020/21 and again, it had applied a retail discount.
  2. In April 2021, the Council sent Mr X’s company a business rates bill for 2021/22. This showed a balance brought forward of £14297.92. The bill said this amount would be collected in ten monthly instalments from May 2021. Following this, Mr X contacted the Council to discuss the bill. The Council told Mr X it had incorrectly applied a retail discount to the business rates account in 2019/20 and 2020/21.
  3. Subsequently, Mr X complained to the Council. He said his company did not apply for any discount on the account and instead, the Council had decided to apply the discount. He said it was not fair and not acceptable to change this now. Mr X continued and said the Council did not explain why there was a balance on the account which had been brought forward and instead, he had to contact the Council to get further information. He said the Council did not apologise to him for the error it had made. Mr X also said his company had already set its budget in accordance with the retail discount and some money had already been spent. Mr X informed the Council he had cancelled the direct debit arrangement which was in place after the Council, without explanation, had tried to take money from their account by direct debit. He asked the Council to remove the ‘unreasonable demand for past years’.
  4. The Council responded to Mr X and explained how it had applied the retail discount to the business rates account in error. It said the business premises was described in the ratings list as “shops and premises”. It became aware in March 2021 that the business premises operated as an accountancy firm and this type of business did not qualify for the retail discount. The Council said when it removed the discount, a debt was generated for the years the discount had been applied to the account and this explained the balance which had been brought forward in the April 2021 business rates bill. It said it was correct in removing the discount and sending Mr X’s company an amended bill however, it recognised it should have written to Mr X and explained why there was a balance brought forward on the bill. The Council apologised to Mr X and said it had spoken to the Council Officer concerned and reminded them of the importance of sending a letter in similar circumstances in the future. The Council noted Mr X had cancelled the direct debit arrangement and informed him the business rates still had to be paid. It offered to extend the monthly instalment plan to 18 months.
  5. Mr X was unhappy with the Council’s response and said it had not apologised or offered any compensation for the initial error of it applying the retail discount to the account. He asked the Council to review his complaint further.
  6. The Council considered Mr X’s complaint further. It responded to Mr X and offered him another apology for any inconvenience the matter may have caused him. It said it could not offer any compensation to him and said its offer to extend the monthly instalment plan was reasonable to help him pay the outstanding debt.
  7. Mr X remained unhappy and complained to us.
  8. Later on, the Council contacted Mr X in relation to the debt which remained outstanding. The Council had issued Mr X with a court summons to recover the debt and urged him to clear it to avoid a liability order. Mr X informed the Council he wanted to attend the liability order hearing. However, prior to the court hearing, a Council Officer contacted Mr X and offered to clear the 2019/20 debt and cancel the court summons including any costs associated with it, if Mr X cleared the 2020/21 debt. This meant Mr X would have to pay £10863.00 and £3444.67 would be cleared. Mr X accepted this offer and paid £10863.00.
  9. A few days later, the Council Officer contacted Mr X and confirmed the Council had received the payment. The Council Officer also said, “In order to assist you I had offered to waive the charge for the 2019-2020 year. Unfortunately this was not within my remit to do so and please accept my sincere apology for any confusion caused. The debt continues to remain outstanding and must be paid”. As the Council had made an error, it offered Mr X an extended payment arrangement to clear the debt of £3444.67 over a 12-month period.

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Findings

  1. The Council wrongly applied a retail discount to Mr X’s company’s business rates account as it thought the business premises operated as a shop. Mr X’s business premises operates as an accountancy firm and so it was not eligible for the retail discount. This was fault.
  2. Mr X’s company was not eligible for the retail discount. The Council removed the discount when it became aware Mr X’s company was not eligible for it. It issued Mr X’s company with a bill in April 2021 which included a balance brought forward of £14297.92. When the Council realised its error, it was not at fault for correcting it. However, the Council failed to explain to Mr X why there was an additional amount for his company to pay. It then tried to take the money owed via the existing direct debit without any explanation. This was fault.
  3. In the Council’s response to Mr X’s complaint, it said it recognised it should have provided Mr X with an explanation of the balance brought forward. It said it had spoken to the staff member concerned and reminded them to do this in the future. The Council’s actions were appropriate to prevent a recurrence of the fault.
  4. The Council Officer offered to remove the 2019/20 debt, cancel the court summons and any associated costs, if Mr X paid the 2020/21 debt. Mr X accepted the offer and paid the 2020/21 debt. However, the Council Officer then said they made an error in offering the agreement and asked Mr X to pay the remaining debt. This was fault because the Council Officer offered an agreement to Mr X without authorisation. This misled Mr X into thinking the matter had been resolved.
  5. Mr X’s company was liable to pay the full business rates and so the Council is not at fault for requiring him to pay these now. It offered an extended period to pay the debt which was appropriate. However, the Council’s failure to explain the debt properly caused him unnecessary distress and frustration. I have made a recommendation in line with our ‘Guidance on Remedies’ to acknowledge the distress and frustration.

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Agreed action

  1. Within one month of the final decision, the Council has agreed it will make a symbolic payment of £300 to Mr X, to acknowledge the distress and frustration the matter caused him.
  2. Within one month of the final decision, the Council has agreed it will remind all officers to provide an explanation to people when there is a significant change to their council tax account. The Council will then provide us with evidence that it has done this.

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Final decision

  1. I have now completed my investigation. There was evidence of fault causing injustice to Mr X which the Council has agreed to remedy.

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Investigator's decision on behalf of the Ombudsman

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