Summary: Mr Y complained on behalf of Mr X who owns a business. Mr Y complained about how the Council handled Mr X’s business rates account. There were some faults by the Council which caused injustice to Mr X’s business. The Council will take action to remedy the injustice caused.

The complaint

1. Mr Y complained on behalf of Mr X, he is Mr X’s representative.
2. Mr Y complained about how the Council has dealt with the Retail Hospitality and Leisure Relief (RHLR) application for Mr X’s business (Z Limited). In particular, the Council:
1. failed to identify Z Limited as the sole lease holder of the premises since March 2019 and as a result the Council failed to transfer the credit of £34,904.65 left in the account of ‘Company A’ (which was trading as Z limited) after its liquidation into Z Limited account.
2. refused to accept Z Limited’s RHLR application covering the period from 21 June 2021 to 5 February 2023 due to the submission deadline which had left Z Limited with an outstanding amount of £167,308.81 business rates.
3. failed to advise Z Limited about the deadline to submit the backdated RHLR application.
4. failed to issue a new demand notice for the £167,308.81 and failed to properly undertake enforcement action to recover the amount.
5. did not offer Z Limited a payment plan option for the outstanding £167,308.81 debt.
3. Mr Y said as a result of the Council’s errors, Z Limited has been left with a debt of £167,308.81 which will lead to the company going into administration because it has no funds to pay the debt.

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The Ombudsman’s role and powers

4. 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 future we may suggest a remedy. (Local Government Act 1974, sections 26(1) and 26A(1), as amended)
5. We consider whether there was fault in the way an organisation made its decision. If there was no fault in the decision making, we cannot question the outcome. (Local Government Act 1974, section 34(3), as amended)
6. We cannot investigate late complaints unless we decide there are good reasons. Late complaints are when someone takes more than 12 months to complain to us about something a council has done. (Local Government Act 1974, sections 26B and 34D, as amended)
7. When considering complaints, 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.
8. 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)

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What I have and have not investigated

9. I have exercised discretion to investigate matters from 21 June 2021 to September 2024 to carry out a meaningful investigation. This is because the complaint suggests there is an ongoing potential fault by the Council and injustice caused to Z Limited. This covers the period from when Mr X’s business liability transferred to Z Limited in 2021 to when Mr Y made a complaint to the Ombudsman.
10. I have not investigated Mr Y’s complaint at point ‘a’ about matters from 2019. This is a late complaint, and I consider it reasonable for Mr X to have complained about the matter earlier. There are no good reasons to investigate it now.

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How I considered this complaint

11. I considered evidence provided by Mr Y and the Council as well as relevant law, policy and guidance.
12. Mr Y and the Council had an opportunity to comment on my draft decision. I considered any comments before making a final decision.

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What I found

Law and guidance

13. National Non-Domestic Rates (NNDR) – are a statutory tax levied by central government on those responsible for commercial property. NNDR are also referred to as business rates.
14. Some businesses are eligible for a reduction in their business rate bill which is called business rates relief. There are different types of business rates relief schemes, including Retail Hospitality and Leisure Relief.
15. 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)
16. 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)
17. The Non-Domestic Rates (Collection and Enforcement) (Local Lists) Regulations 1989 cover both the way councils collect payments of business rates, and the way councils can recover such debt. The Tribunals, Courts and Enforcement Act 2007 and associated regulations cover the way enforcement agents may recover debts.
18. Business rates are charged on most non-domestic properties. A council will send a business rates bill each year based on the information it holds. Councils must send the person liable for payment of business rates a reminder and a notice before taking recovery action.
19. Recovery action is through the issue of a summons and getting a liability order through the magistrates' courts. When the debt is passed to an enforcement company, additional fees are added to the outstanding bill.
20. A company name is the official legal name registered with Companies House. A trading name is the name a business uses to identify itself to customers and for marketing purposes. There is no requirement to register a trading name with Companies House.
21. Councils will not usually be aware when a business changes ownership; it is up to business owners to provide the council with up-to-date information.

Key events

2021 - 2022

22. Mr X owned a business, ‘Company A’ which traded as ‘Z Limited’.
23. On 21 June 2021, Z limited received an unsigned lease for the business premises.
24. In July 2021, Company A trading as Z Limited applied for and was awarded a business rate discount of £71,166.73. This covered the period from 1 July 2021 to 31 March 2022.
25. Company A paid its business rates through direct debit from its ‘trading as’ account and the Council applied the business rates discount to the same account.
26. On 6 October 2022, Company A went into liquidation.

2023

27. An insolvency practitioner confirmed to the Council that Mr X’s business liability, transferred from Company A to Z Limited on 21 June 2021. The Council conducted a site inspection of the company’s premises in February and confirmed no one was on site.
28. In March, Z limited was registered as the company name for Mr X’s business which was backdated to 21 June 2021, when Z limited received an unsigned lease.
29. The Council issued two demand notices to Z Limited for its business rates arrears:

• £111,763.72 (21 June 2021 – 31 March 2022)
• £143,640 (1 April 2022 – 31 March 2023)

30. In April and May, the Council sent reminders and final notices to Z Limited for its outstanding arrears.
31. On 15 May, Z Limited informed the Council it wished to apply for Retail Hospitality and Leisure Relief (RHLR) and for the discount to be backdated to 21 June 2021. The Council said it was unsure whether Z Limited would be entitled to RHLR, and it said a discount would only be backdated to 1 April 2022 and not 2021. The Council reminded Z limited about its outstanding business rates debt.
32. Z Limited disputed both arrears of £111,763.72 (21 June 2021 – 31 March 2022) and £143,640 (1 April 2022 – 31 March 2023). Z Limited said it believed it was entitled to the RHLR and alleged it had made some historic payments against its arrears.
33. In July, the Council asked Z Limited to provide it with proof of the alleged payments it had made. The Council also advised Z Limited it would need to apply for RHLR and reiterated it could not apply for the 2021/2022 financial year. Mr Y said the Council did not mention a deadline for submitting the RHLR application.
34. The Council issued Z Limited with a summons for its outstanding business rates debts.
35. In October, the Council confirmed Z Limited’s business account was closed on 4 February 2023.
36. Between October and November, Z Limited and the Council exchanged several emails.
37. Z Limited asked the Council to apply the historic payments it had made (£85,514.50) to Z Limited's account to reduce its outstanding business rates arrears. It also said it had applied for the RHLR. Z Limited questioned why the Council could not automatically award RHLR to it from 2021/2022 financial year as both Company A and Z Limited were the same company and occupied the same premises despite Company A’s liquidation.
38. The Council disagreed with Z Limited. The Council said while the two companies may have traded the same, both were separate registered companies. The Council confirmed it had not received any RHLR application in the name of Z Limited. The Council said by law it could only apply its discretionary rate relief up to six months after the financial year an application relates to.
39. In November, the Council told Z Limited its business rates debt remained outstanding until the company provided proof of all payments Z Limited said it made towards its arrears. And until the Council received sufficient evidence to show it had applied for RHLR in the name of Z Limited before 30 September 2023.
40. The Council passed the recovery of Z Limited’s outstanding business rates arrears to an enforcement agency (EA).

2024

41. In March, Mr Y said the Council issued a copy demand notice of £167,308.81 to Z Limited for its business rates arrears to cover the period from June 2021 to February 2023. The Council also provided Z Limited with a statement of account/breakdown of its outstanding bill and the Council advised Z Limited to contact it to agree a suitable payment arrangement to clear its £167,308.81 debt.
42. Z Limited informed the Council it noticed it had submitted the RHLR application in the name of Company A instead of Z Limited. It said it was an administrative error and asked if the Council could accept a new RHLR application in the name of Z Limited and then backdate to a period before April 2023. The Council said it was unable to accept a new RHLR application for the backdated period requested.
43. In April, Mr Y said the Council issued a notice of enforcement for Z Limited’s outstanding £167,308.81 debt. Mr Y said Z Limited then received a letter from the EA requesting it paid the £167,308.81 in full by May.
44. Mr Y made a complaint to the Council about how it had handled Z Limited’s business rates account. Mr Y complained the Council:

• issued demand notices to Z limited for different business rates amounts between March 2023 and March 2024 which did not reflect the correct liability dates and amount the company owed
• only issued Z Limited with a copy demand notice via email for £167,308.81 in March 2024 (for the period from 21 June 2021 to 5 February 2023) instead of issuing a ‘new demand notice’ to reflect the revised bill. He complained the Council continued with the recovery action based on the previous bill (£111,763.72 and £143,640) and it failed to issue Z Limited with reminder notices and summons for the revised bill before it commenced recovery action for the £167,308.81 bill
• did not advise the company of the deadline for submitting a RHLR application which left Z Limited with a business rates liability bill of £167,308.81. He questioned why the Council did not automatically apply the RHLR to Z Limited when Company A went into liquidation because they were both the same company. Mr Y also questioned why the Council did not use its discretion to accept Z Limited’s RHLR application and backdate the discount to 2021 like other local councils do
• asked Z Limited to pay the outstanding £167,308.81 debt in full and that the Council refused to accept a payment plan.

45. The Council in its responses said:
1. Z Limited was not registered until March 2023 and backdated to 21 June 2021. It said before that date; the business rates liability was in the name of Company A and payments were received from Company A’s account. It said it also applied the RHLR to Company A’s account and that the Council was not advised the Company A account was incorrect.
2. the liability under the summons for the original bill (£111,763.72 and £143,640) was billed correctly and the liability order for its recovery was also correctly obtained and would not be withdrawn. The Council said it applied the payments Z Limited made after it obtained the liability order to its account which then reduced its outstanding balance.
3. Z Limited only informed the Council in May 2023 that it vacated its business premises in January 2023 and about its intention to apply for RHLR. The Council confirmed it did not advise Z Limited of the RHLR application submission deadline. But it maintained it had told the company it could not backdate the discount to 2021/2022 financial year.
4. it never received a RHLR application form submitted in the name of Z Limited.
5. it was unable to comment on how other councils applied their discretionary rate relief powers. But it reiterated the law limited its decision to award discretionary rate relief to six months after the financial year it relates to.
6. a balance of £167,308.81 on Z Limited’s account for the period 21 June 2021 to 5 February 2023 remained due and payable. It said as a goodwill gesture the Council would recall Z Limited’s account from the EA and it would directly agree a payment plan with Z Limited.
46. Mr Y remained dissatisfied with the Council’s responses, and he made a complaint to the Ombudsman.
47. The Council confirmed to the Ombudsman that it had arranged an interim payment plan of £1,000 per month with Z Limited so it could pay off its debts for the period from 21 June 2021 to 5 February 2023. The interim payment plan started in September.

Analysis

48. The Ombudsman is not an appeal body, and it is not our role to decide if Z Limited was entitled to discretionary business rates relief; that is the Council’s responsibility. Our role is to consider whether the Council made its decision properly and followed the right process. If we consider it followed the process correctly, we cannot question whether the decision was right or wrong.
49. The law states councils cannot award the discretionary rate relief for a particular financial year more than six months after the end of that year.
50. At the time Z Limited informed the Council in May 2023 of its intention to apply for RHLR and a request for a backdated discount to 21 June 2021, it was already six months after the end of the 2021/2022 financial year. Therefore, I find no fault by the Council in its decision not to accept and backdate Z Limited’s RHLR application to 21 June 2021. This was a decision the Council was entitled to make and one which was made in line with relevant legislation.
51. Also, Z Limited did not submit a RHLR application after its contact with the Council in May 2023. The Council confirmed it did not receive any RHLR application in the name of Z Limited. The company also admitted in March 2024 it made an error when it submitted the RHLR application in the name of Company A instead of Z Limited. Therefore, there was no RHLR application made by Z Limited which the Council could have considered. Also, the Council refused to accept a new application from Z Limited because the six months deadline had lapsed for both 2021/2022 and 2022/2023 financial years at the time Z Limited informed the Council in March 2024 of its administrative error. There were no faults by the Council.
52. But I find fault by the Council for its failure to inform Z Limited about the deadline for submitting an RHLR application. There were missed opportunities in May and July 2023 where the Council could have advised Z Limited about the six months discretionary rate relief deadline. This was fault because the deadline for 2022/2023 financial year had passed by the time the Council mentioned the six-month timescale to Z Limited in November 2023.
53. Although, Z Limited might have missed out on the six-month timeframe, on balance, I find no injustice was caused to Z Limited for not submitting its RHLR application for financial year 2022/2023. This is because it submitted the application in the name of Company A instead of Z Limited. It is therefore unlikely the outcome of the RHLR application would have affected or benefitted Z Limited.
54. This fault did not cause injustice to Z Limited for the 2021/2022 financial year, either. This is because the deadline for an application for that financial year had lapsed by the time Z Limited informed the Council in May 2023 about its intention to apply for a backdated RHLR to 21 June 2021.
55. We expect councils to provide evidence of legal documents it issued to debtors to show they have followed the proper legal process for enforcement. In this case, the Council issued a demand notice for £167,308.81 to Z limited, a statement of account and breakdown of the bill and the relevant statutory documents to Z Limited. These actions were done before the Council passed the recovery of the £167,308.81 debt to the EA. This was not fault.
56. I also find the Council promptly advised Z Limited in March 2024 to make a repayment proposal to clear its £167,308.81 debt. This was the same month the Council issued Z Limited with the demand notice for the bill and before it passed the debt to the EA in April 2024. This was not fault.
57. Furthermore, I find after Z Limited complained to the Council about setting up a repayment plan for its £167,308.81 debt, the Council as a goodwill gesture withdrew the debt recovery action from the EA and it agreed an interim monthly payment plan with Z Limited to help clear its outstanding debt.

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Action

58. To remedy the injustice caused by the faults identified, the Council has agreed to complete the following within one month of the final decision:

• agree an ongoing payment plan with Z Limited to clear its outstanding debt
• provide relevant business owners with clear, accurate and timely information about the six-month discretionary business rates relief deadline.

59. The Council should provide us with evidence it has complied with the above actions.

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Decision

60. I find some faults by the Council leading to injustice. The Council will take action to remedy the injustice caused.

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Investigator's decision on behalf of the Ombudsman