Summary: Company X complained, on behalf of Company Y, that the Council wrongly reversed its decision to award discretionary business rates relief to Company Y. There was fault in how the Council tried to revoke its earlier decision which it said was incorrect. The Council did not give the required notice of its decision to revoke. It agreed to reinstate Company Y’s discretionary rate relief and refund any sums Company Y overpaid. It also agreed to remind its staff about the rules for changing business rate relief decisions.

The complaint

1. Company X complains on behalf of Company Y that the Council wrongly reversed its decision to award discretionary business rates relief to Company Y in 2022. Company X also complains the Council breached the direct debit guarantee by taking money from his client’s account without permission and failed to properly explain its decisions. Company Y has been impacted financially by the Council's decision and wants the Council to reinstate the relief.

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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 significant injustice, or that could cause injustice to others in the future we may suggest a remedy. (Local Government Act 1974, sections 26(1) and 26A(1), as amended)
3. We consider whether there was fault in the way an organisation made its decision. If there was no fault in how the organisation made its decision, we cannot question the outcome. (Local Government Act 1974, section 34(3), as amended)
4. We provide a free service, but must use public money carefully. We may not start or continue an investigation where there is another body better placed to consider a complaint. (Local Government Act 1974, section 24A(6), as amended, section 34(B))
5. The Direct Debit Guarantee is administered by participating banks and building societies. If an error is made by either the organisation claiming a direct debit, or someone’s bank or building society, the person can claim a full and immediate refund from their bank or building society.
6. When considering complaints, if there is a conflict of evidence, we make findings based on the balance of probabilities. This means that we look at the available relevant evidence and decide what was more likely to have happened.
7. 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)
8. 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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What I have and have not investigated

9. I have investigated how the Council made its decisions to award and then revoke Company Y’s rate relief.
10. I have not investigated whether the Council complied with the Direct Debit rules or Guarantee. It would have been appropriate for Company Y to complain to their bank about any dispute involving the Direct Debit.

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How I considered this complaint

11. I considered:
• the information Company X provided;
• the Council’s comments on the complaint and the supporting information it provided; and
• relevant law and guidance.
12. Company X, Company Y and the Council had an opportunity to comment on my draft decision. I considered their comments before making a final decision.

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What I found

Discretionary Business Rate Relief

13. Councils have the power to further reduce the business rates of eligible premises on top of any statutory business rate relief a business is entitled to. This extra relief is usually called ‘discretionary business rates relief’. (Section 47, Local Government Finance Act 1988)
14. Councils can make their own rules for discretionary rate relief schemes, including which premises are eligible and how much the relief should be. If a Council decides its scheme applies to a particular business premises, it reduces the business rates for those premises according to the rules of the scheme.
15. If a council decides the rules of its scheme applies, it must give the business notice of its decision including the first day the relief applies and, if appropriate, the last day. (Regulation 2(1), The Non-Domestic Rating (Discretionary Relief) Regulations 1989)
16. A council can revoke a decision that a premises is eligible for relief under its scheme by making a further decision (Section 47(6), Local Government Finance Act 1988)
17. If a Council wishes to revoke a decision to award discretionary rates relief, its decision to revoke must:
• take effect at the end of a financial year; and
• give at least one year’s notice of the effective date of the decision. (Regulation 2(3), The Non-Domestic Rating (Discretionary Relief) Regulations 1989)
18. Councils cannot award discretionary rate relief for a particular financial year more than six months after the end of that year (Section 47(7), Local Government Finance Act 1988)

COVID-19 Expanded Retail Discount

19. In response to the COVID-19 pandemic, the Government announced guidance that it would fund 100% business rates relief for various types of retail premises affected by the pandemic in the 2020/21 financial year. This was called the ‘Expanded Retail Discount’.
20. This guidance said councils should adopt a local discretionary relief scheme, under section 47 of the Local Government Finance Act 1988, to give effect to the guidance and provide relief in line with that scheme to eligible businesses.
21. The Government extended the discount in 2021/22 but with a 100% discount for the first three months of the year and then a 66% discount for the rest of the year.
22. For 2022/23 the Government replaced the discount scheme with the ‘Retail, Hospitality and Leisure Relief Scheme’. This provided for a 50% discount for much the same businesses as the previous Expanded Retail Discount.
23. The Council adopted local rules to give effect to the Government guidance.

What happened

24. Company X contacted the Council, on behalf of Company Y, in early September 2022 asking the Council for discretionary relief under the Government guidance for the 2020/21, 2021/22 and 2022/23 financial years.
25. The Council replied a few days later and told Company X that is had “applied Extended Retail Relief to your client’s account and a revised bill will be issued.” It issued amended business rates bills on the same date showing:
• a 100% discount for 2020/21;
• a 100% discount for the first three months of 2021/22 and a 66% discount for the rest of that financial year; and
• a 50% discount for 2022/23.
26. The Council later confirmed it had applied the relief from 1 April 2020, the amounts and that there was a substantial credit which could be refunded to Company Y on request. Company X asked for the refund on behalf of Company Y.
27. While authorising the refund, the Council realised that it could not award relief for the 2020/21 year because its decision was made more than 6 months after the end of that financial year. It removed the 2020/21 award and refunded the business rates Company Y had paid for 2021/22 in late September 2022.
28. In mid-October 2022 the Council contacted Company X saying that Company Y was not eligible for the relief for 2021/22 or 2022/23. It referred to a decision it had made in 2021 that Company Y was not eligible. The Council revoked its previous decisions, removed the relief from Company Y’s accounts, issued new bills and reclaimed, by Direct Debit, the refund it had previously made at the end of October 2022.
29. Company X and the Council then engaged in extensive correspondence over several months. Company X argued that the Council could not revoke its decisions without giving the required notice under the appropriate regulations. It provided several independent professional opinions to support its position. The Council disagreed and said that the regulations did not apply to its decision to award or revoke the relief.
30. Because they were not satisfied with the Council’s response, Company X complained to the Ombudsman on Company Y’s behalf in May 2023.

My findings

31. It is not our role to decide if Company Y was entitled to discretionary business rate relief; that is the Council’s responsibility. Our role is to assess whether the Council made its decision properly and followed the right process.
32. In its response to my enquiries the Council said it had not made a decision to award relief to Company Y, since it had decided in 2021 than the company did not qualify.
33. However, I am satisfied the Council did decide, in September 2022, to award relief to Company Y, since it:
• confirmed in writing that it had applied “Extended Rate Relief”;
• it issued amended bills showing that relief; and
• refunded the business rates Company Y had paid for 2021/22.
34. The Council clearly made a decision that Company Y was eligible under the scheme rules and then gave effect to that decision. It does not matter that the decision was, in the Council’s view, “incorrect” or “wrong”. It made a new decision that Company Y was eligible.
35. The Council also argued the discounts it applied were not discretionary relief under section 47 and therefore the associated regulations did not apply.
36. I am satisfied the Council’s September 2022 decision was made under section 47, for the following reasons:
• The Council referred to “Extended Retail Relief” in its confirmation about the decision. While this was not the exact wording used in the Government guidance, I am satisfied it had the same meaning.
• The discounts the Council applied and how these were described on the amended bills were exactly the same amounts as in the Government guidance for the periods concerned.
• The Government guidance was clear that the relief it was funding would be awarded via section 47 discretionary relief.
• The Council’s own policies refer to the relief being made under section 47.
37. Since the Council made its decision in September 2022, the law says its decision to award any relief for 2020/21 was invalid. Therefore, I find there was no fault with how the Council removed the discount for 2020/21 when it realised it could not award it.
38. The Council’s decisions for 2021/22 and 2022/23 were made in time. The Council can revoke those decisions, subject to the rules about giving the required notice under the regulations.
39. However, the Council decided to revoke its earlier decision, that Company Y qualified for relief, in mid-October 2022. This was not at the end of a financial year and did not provide the required notice under the regulations. That failure to follow the appropriate regulations was fault.
40. The Council’s decision to revoke the September 2022 awards of rate relief did not comply with the regulations. The Council should therefore reinstate the relief and refund Company Y accordingly.

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Agreed action

41. Within one month of my final decision the Council will:
• apologise to Company Y for not following the appropriate regulations when trying to revoke its September 2022 decision;
• reinstate the discretionary rate relief for 2021/22 and 2022/23; and
• refund Company Y any sums it paid, or the Council claimed via Direct Debit, because of its decisions to revoke the original awards, plus interest of 5.44%.
42. Within three months of my final decision the Council will remind relevant staff of the rules and regulations for revoking or changing decisions about discretionary business rate relief.
43. The Council should provide us with evidence it has complied with the above actions.

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Final decision

44. I have completed my investigation. There was fault in how the Council tried to revoke its earlier decision it said was incorrect. The Council did not give the required notice of its decision to revoke. It agreed to reinstate Company Y’s discretionary rate relief and refund any sums Company Y overpaid. It also agreed to remind its staff about the rules for changing business rate relief decisions.

Investigator’s decision on behalf of the Ombudsman

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Investigator's decision on behalf of the Ombudsman