Summary: Mr X owns a building within the curtilage of his home. He says the Council told him the building would be exempt from Council Tax. As a result, he registered the building with a holiday letting company. Approximately six months later the Council said that no exemption applied and that he was liable for full Council Tax. We found no fault by the Council.

The complaint

1. Mr X owns a building (Annex A) within the curtilage of his home which he intended to use as a holiday let. He says he was advised by the Council in July 2023 that the building would be exempt from Council Tax. As a result, he registered Annex A with a holiday letting company. Approximately six months later he was then told by the Council that no exemption applied and that he was liable for full Council Tax. Mr X says he was not made aware of the liability as soon as practicable by the Council and as such would not have registered with the holiday letting company if he was liable for the whole Council Tax.
2. Mr X says due to the Council’s misleading advice and delay, he has paid £500 to the holiday letting company for early termination of the contract.

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The Ombudsman’s role and powers

3. We investigate complaints of injustice caused by ‘maladministration’ and ‘service failure’. I have used the word fault to refer to these. 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. 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

5. I have not investigated the Council Tax exemption decision. Mr X has appealed to the Valuation Tribunal. The Valuation Tribunal is an independent body which can determine any dispute about such decisions. The Ombudsman cannot investigate a complaint about the same matter where an appeal to a Tribunal has also been made.
6. I have also not investigated events after February 2024 as this is when Mr X terminated his contract with the holiday letting company and incurred the alleged financial loss, which is the basis of his complaint to the Ombudsman.

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How I considered this complaint

7. I considered the evidence provided by Mr X and the Council as well as any relevant law, policy and guidance.
8. Mr X 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

Background

9. Mr X owns Annex A, a building within the curtilage of his home. Prior to 1 April 2023 a holiday let had to be available for let for more than 140 days for it to be classed as non-domestic. Annex A had been classed as non-domestic self-catering accommodation since April 2014 and Mr X had been in receipt of full small business rate relief for the whole period through to 31 March 2023.
10. On 1 April 2023 the Government changed the criteria for when a holiday let should be rated for business rates. The Government decided that the holiday let also had to have been let for 70 days in the financial year. If a holiday let did not meet this criteria it was moved into the domestic council tax list. The Valuation Office Agency (VOA) were tasked with establishing whether holidays lets rated for business rates should remain in the rating list or be moved into the domestic banding list.
11. The Council explained the main implication for owners of a holiday let was that when classed as non-domestic property, for the most part, the owner was able to claim 100% small business rate relief thus not paying any rates. There are fewer exemptions available in the council tax system if the property is moved to the council tax list meaning that owners were more likely to have to pay council tax.

What happened

12. Below is a brief chronology of key events. It is not meant to show everything that happened.
13. On 24 July 2023 Mr X spoke to the Council about the change in regulations. He sent a follow up email stating that based upon his understanding of the conversation, the Council said Annex A would be exempt from Council Tax due to a planning restriction which prevented him letting it out for more than 4 weeks at a time.
14. On 26 July the Council responded to Mr X’s email and explained he would need to contact the VOA to determine whether the change in regulations affected Annex A. The Council provided Mr X with a link to the new criteria and contact details for the VOA.
15. Mr X said he spoke to the Council again and was advised that Annex A would be exempt from Council Tax and on this basis he signed a two-year contract with a holiday let company.
16. On 1 November the VOA contacted the Council requesting a new Council Tax reference for Annex A. The Council created a new reference number and sent this to the VOA.
17. The Council sent Mr X a letter confirming it had sent details for Annex A to the VOA. The letter stated “Until the VOA notify us of the band we cannot calculate how much monthly council tax you have to pay. However, to avoid receiving a bill with potentially large instalments, we recommend that you make interim payments during this time".
18. On 10 November Mr X contacted the Council again requesting an exemption. He provided a copy of planning permission from 2011 regarding a change of use for Annex A into to a holiday let. Mr X said he was advised he was exempt from paying Council Tax. He subsequently provided documents to the Council to support his application for an exemption.
19. On 19 November the VOA changed Annex A from being liable for business rates to Council Tax. The VOA informed the Council accordingly and two days later the Council issued Mr X with a demand notice for full Council Tax payment of £1683.10. In response to our enquiries the Council confirmed that Mr X would already have been notified that Annex A was being moved from the business rates list to the council tax list by the VOA prior to the demand notices being issued by the Council.
20. On 31 January 2024 Mr X contacted the Council again about a Council Tax exemption for the Annex. The Council responded to Mr X and explained that no exemption applied, and he was liable for full Council Tax on the property.
21. Mr X told the Ombudsman that due to the Council Tax charges it was not financially viable for him to let Annex A. Mr X said that at the time Annex A had no lettings. In February he contacted the holiday letting company and terminated the contract by paying a cancellation fee of £500. Mr X also explained that if he had terminated the contract in July 2023 the cancellation fee would not have applied. Mr X said he had incurred further financial losses as he was also liable for Council Tax during the period.
22. In March Mr X appealed to the Valuation Tribunal.
23. In June Mr X complained to the Council, as set out in paragraphs 1 and 2 above. The Council responded to Mr X confirming he had appealed the Council Tax decision with the Tribunal and therefore it had no further involvement in his case.

Analysis

24. As set out in paragraph 5, I cannot investigate any complaint about Council Tax liability, nor Mr X’s right to an exemption as this is a matter for the Valuation Tribunal. Instead, my investigation focuses on the Council’s communication with Mr X, and whether the advice it gave him about Annex A in July 2023 was misleading.
25. I recognise that Mr X spoke to the Council in July 2023 about an exemption. The Council does not have a record of the telephone conversation and therefore I cannot verify what was said. However, I am satisfied that two days later the Council told Mr X that he should contact the VOA to determine whether the change in regulations affected Annex A. Having reviewed the Council’s correspondence with Mr X before he pursued the letting contract, I cannot see any evidence the Council advised him Annex A would be exempt. It was therefore open to Mr X to make further enquiries with the VOA and establish any future potential liability for payment of Council Tax. This would have allowed him to make an informed decision about the letting contract.
26. As part of my enquiries, I asked the Council to comment on Mr X’s assertions he would not have pursued a letting contract for Annex A had he known he would be liable for Council Tax. In response, the Council said Mr X was served with a demand notice for full Council Tax at the first possible opportunity, when the VOA changed Annex A from business rates to Council Tax in November 2023. Following this, the Council sent Mr X a demand notice for full payment. I agree with the Council here. This is because the liability for Council Tax was a decision for the VOA to make, not the Council. As soon as the VOA notified the Council of its decision, the Council billed Mr X accordingly, two days later.
27. Mr X terminated the letting contract three months after the VOA made its decision and the Council issued a bill. As Mr X explained to the Council and the Ombudsman his decision to terminate the contract was also influenced by the lack of holiday bookings.
28. I have found no evidence the Council gave Mr X misleading advice in July 2023 that Annex A would be exempt from Council Tax.

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Decision

29. I have found no fault by the Council in this case. I have completed my investigation on this basis.

Investigator’s decision on behalf of the Ombudsman

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Investigator's decision on behalf of the Ombudsman