Summary: Ms X complained the Council did not award her business the expanded retail discount, which would reduce the business rates it had to pay. We have found fault as we find the Council reached its decision on eligibility without taking account of all relevant factors. This created uncertainty. The Council accepted these findings and agreed to review its decision as one of several actions set out at the end of this statement.

The complaint

1. I have called the complainant ‘Ms X’. She complains on behalf of her business, a limited company. Her business uses a unit on an industrial estate in the Council’s area and so must pay it business rates. Ms X complains the Council has not applied expanded retail discount (ERD) relief, which would reduce those business rates. Ms X says this decision fails to take account that the unit is primarily used for retail. She says four similar units used by the business, each located in a different council area, have all received the discount.
2. Ms X says because of the Council’s decision, the business has missed out on a source of financial support during the COVID-19 pandemic.

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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 cannot question whether an organisation’s decision is right or wrong simply because the complainant disagrees with it. We must consider whether there was fault in the way the decision was reached. (Local Government Act 1974, section 34(3), as amended)
4. 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)
5. 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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How I considered this complaint

6. Before issuing this decision statement I considered:

• Ms X’s written complaint to the Ombudsman and any supporting information she provided;
• correspondence between Ms X and the Council which refers to the matters complained about and pre-dated this investigation;
• further information provided by the Council in reply to my written enquiries;
• any relevant law, guidance or policy referred to in the text below.

7. I gave both Ms X and the Council an opportunity to comment on a draft decision which set out my initial thinking about the complaint. I took account of any comments made in response (or further evidence provided), before reaching this final decision.

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What I found

The Expanded Retail Discount (ERD) Scheme

8. The ERD scheme was established by Government in April 2020 in response to the COVID-19 pandemic. It initially ran for the 2020-21 financial year and was subsequently extended, in modified format, for the 2021-22 and 2022-23 financial years.
9. The Government has produced guidance to accompany the scheme which has been periodically amended. But common to all versions the guidance has explained the ERD is available to premises used wholly or mainly for retail, hospitality or leisure.
10. The guidance say retail premises are those used “for the sale of goods to visiting members of the public”. Also included are retail business which provide “services to visiting members of the public”. The guidance gives examples of businesses that meet these definitions. It also notes some premises will have a mixed use. The guidance says it is impossible to list every business that may qualify. So, councils have to “determine for themselves whether particular properties not listed are broadly similar in nature to those above and, if so, to consider them eligible for the relief. Conversely, properties that are not broadly similar in nature to those listed above should not be eligible for the relief.”
11. The guidance says eligibility depends on the premises being “wholly or mainly used” for a “qualifying purpose”, such as those listed above.
12. Premises not reasonably accessible to visiting members of the public are not eligible for the ERD. The guidance also expressly excludes some types of business from qualifying.

Chronology/Key facts

13. Ms X’s business is focused on the manufacture, servicing, repair and retail of products and supplies in a specialist area of engineering. The business has a central office located in another council area and a separate manufacturing site for large-scale projects. It also operates out of several smaller units located in different council areas, including the one at the crux of this complaint, which it has traded from for several years.
14. The unit is located on an industrial estate. A central Government agency, the Valuation Office Agency (responsible for compiling the ‘rating list’ of all rateable property in England) records the unit as being a ‘workshop and premises’; not a retail unit.
15. The unit is however, open to members of the public. They can park outside and walk into the unit and buy off the shelf an array of products, paying at a counter. They can also order products or parts in advance and collect those from the counter. The unit also provides a diagnostics and repairs service with machinery located for this purpose to the rear of the counter in an area which is also used for storing parts. The unit also has an office space and more storage in a mezzanine area, although this is largely unused.
16. The business sells direct to tradespeople and members of the public. Most sales are made on cash terms, with Ms X saying this branch has only one trade customer who has sales on credit terms.
17. In Marchl 2021 Ms X contacted the Council to enquire about receiving ERD relief. The notes of the telephone call say the Council noted the premises were listed by the VOA as a workshop and premises. It appears to have questioned therefore if the unit would qualify for the discount. But Ms X said she would send details to the Council including photographs.
18. Between May and July 2021, Ms X three times chased the Council to enquire if it had decided whether the unit qualified for the ERD. On one occasion the Council told her it was focusing its work at that time on issuing summons for non-payment of rates and administering COVID-19 business grant support schemes. An email also cautioned Ms X that her business would not appear to qualify as the Council understood it was a workshop and premises.
19. At the end of August 2021, the Council refused the ERD. It apologised for the delay in its response. The Council referred to the Government guidance quoted above saying to qualify business premises had to be used wholly or mainly for sales to visiting members of the public. By way of an example, it compared a popular DIY chain-store with a well-known builder’s merchant. It said the former qualified for the ERD but not the latter.
20. In September 2021 Ms X asked the Council to reconsider. She explained more about the use of the unit saying it sold goods to members of the public. It was not a trade store like the builder’s merchant mentioned – as no-one needed to set up an account to buy products. She said the Council had therefore based its decision on incorrect assumptions.
21. The Council agreed to reconsider and in October 2021 it asked one of its property inspectors to visit the unit, and they did so at the beginning of November 2021. The Council asked the inspector for a description of the unit and to take measurements to find out how much of the unit’s floor space was used for retail.
22. The Inspector provided notes, photographs and a hand drawn sketch of the unit. He said his measurements were estimated but that he thought the workshop and storage area was larger than the retail area.
23. A few days after the visit the Council wrote to Ms X and said that further to the inspection it still considered the unit did not qualify for ERD. It said this was because the retail element “did not constitute the majority of the floorspace”. It considered therefore that the retail element of the unit was not the whole or main use of the premises.
24. The Council noted that its position may be different to other authorities. In comments in response to my enquiries the Council has said it had checked with other councils, and they too used floorspace as a guide, because rateable values are calculated on this basis. It also said it had also taken legal advice. However, the Council then went on to say that its current practice was “out of step” with other councils and that it “provisionally agreed” to grant the ERD on the unit for the 2022/23 financial year.

Findings

25. I noted above that disagreement with a council decision is not a ground for me to find fault with it. I consider it follows from this that there will also be occasions when councils disagree on cases that follow similar facts, and this too will not be evidence of fault. Nor is there any inherent fault if a council decides to adopt a different approach to similar facts over time. Because a council can legitimately evolve a different approach over time without this being fault.
26. So, while I can understand Ms X’s concern at the apparent inconsistency between the Council and others on whether the branches of her business should qualify for the ERD, I cannot fault the Council on those grounds. Nor can I find fault simply because it has now signalled an apparent change in approach.
27. My investigation has therefore focused on the Council’s approach to Ms X’s request for the ERD for the 2021/22 financial year. I note at the outset that Ms X’s business is niche and not purely confined to retail. I find there is nothing prescriptive in the Government guidance therefore, which would make it obvious whether the business unit at the crux of this complaint qualified or not for the ERD. So, this is a case where the Council must use its judgment having applied itself to the relevant facts.
28. The Council’s view the business does not qualify for the ERD rests on the view the unit is not used ‘wholly or mainly’ for sales to visiting members of the public. Initially it seems to have based this decision on the misconception the business operated like a builder’s merchant, where users would have to open a trade account. I am satisfied this was a flawed decision, based on an inadequate understanding of what the use of the unit entails.
29. The Council’s decision on review, in November 2021, took account of Ms X’s comments on this matter. In that decision, the Council no longer relied on the business operating like a builder’s merchant. Instead, the Council relied on an inspection of the property. It put weight on the area of the business open to the public (which I will call ‘the retail space’). It decided the business could not be used wholly or mainly for sales to visiting members of the public because this retail space did not form more than 50% of the unit. Or else, it was smaller than the workshop/storage space to the rear.
30. I consider there was no fault in the Council taking account of the measurement of the retail space when making its decision. I consider it legitimate for a council to look at what space is occupied by different uses of a business, when confronted with premises that have a mixed use.
31. However, it would be perverse for a council to consider this factor to the exclusion of all others. Take for example, a typical butcher’s shop which may have a relatively small counter area for customers with space behind the counter for refrigeration of meat and preparation. No-one would seriously argue a butcher’s shop is not a retail use. Yet using the approach adopted by the Council in this case might result in refusal of the ERD on the basis less than 50% of the shop is used for retail space.
32. This leads to the nub of the problem with the Council’s approach. It has not addressed itself directly to the use of the premises in this case. If the whole or main use of the unit is not for retail then what it is used for? The Council cannot fall back on the rating list here. Because Government guidance makes clear the ERD is a test on the use of the premises. So, it would not automatically follow that just because the rating list identified a premises for retail that it would receive the ERD, if it transpired there was no retail use being carried on from those premises. Likewise, it does not follow that just because the rating list identifies the premises as a workshop that this is the whole or main use of the unit or even a use at all.
33. The Council noted the area outside the retail space was used for storage and contained some limited machinery. But it does not appear to have asked itself how the use of that space related to the retail space. On Ms X’s account the machinery is used in fulfilment of customer orders. So, it may be considered similar to the service offered by say, a shoe repairer (a type of business which would usually qualify for the ERD) who may take the shoe away and work on it in the ‘back room’ before handing the repaired shoe to the customer. While the storage may also be used for restocking the shelves in the retail space or fulfilling customer orders over the phone, collected in person.
34. The Council has not therefore considered that if the main use of the shop is not retail to members of the visiting public; is it providing a service to visiting members of the public? Or is the use of the workshop/storage space ancillary or part of the whole retail use of the site? It has not established the customer profile of the unit – for example, how much of its business is made up of retail sales over the counter or customers seeking repair. Or if any other business is conducted from the site that is not over the counter, such as online sales or if it used by mobile engineers for parts – something which forms another arm of the overall business.
35. I consider the questions at paragraph 34 all relevant to a properly reasoned decision on whether the business should qualify for the ERD. As I do not find evidence the Council has taken them into account, I consider its decision taken with fault.
36. I consider this creates injustice for Ms X in the form of uncertainty, something we regard as a form of distress. Because Ms X does not know if a decision taken without fault by the Council would have resulted in a different outcome. I set out proposals to remedy this injustice below.
37. But before I do so, I must also draw attention to a second fault in this case, which centres on the poor customer service Ms X received. She made a request the Council consider applying the ERD to the unit’s business rates account in April 2021. Yet she received no reply to that for over four months, until August 2021. I consider this an unacceptable delay, made worse by the Council’s failure to keep in touch with Ms X in the meantime leaving her to chase a reply on three occasions.
38. I accept the Council will have been operating under exceptional pressures, with the burdens of work created because of the COVID-19 pandemic adding to its usual workload of billing, inspection and collection. So, some delay may have been unavoidable. But this only makes it more important the Council has in place a means of keeping in touch with users of its services who have outstanding enquiries or complaints.
39. The fault here has resulted in some further injustice for Ms X as she expended unnecessary time and trouble in getting a response to her request for consideration of the ERD.

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Agreed action

40. The Council accepts the findings I have set out above. To remedy the injustice identified at paragraphs 36 and 39 it has agreed that within 20 working days of this decision it will:
1. write to Ms X with an apology accepting the findings of this investigation;
2. pay Ms X’s business £200 in recognition of the distress, time and trouble identified;
3. commit to carrying out a review of the decision to refuse the ERD for the 2020/21 and 2021/22 financial years in line with paragraph 41 below. If that review finds the business should have received the ERD the Council will apply that discount or, if this is no longer possible, apply a credit to the rates account to the equivalent value for that financial year.
41. The review recommended at paragraph 40c) above will be carried out by a senior officer who has had no previous involvement in the events covered by this complaint. It will aim to complete no more than two months from the date of this decision, a timeframe which should allow the Council to request any further information it needs from Ms X and for her to provide the same. It will take account of my analysis above (especially that at paragraph 34) to ensure the Council takes all relevant factors into account in reaching its decision. The Council will provide a decision in writing and explain how Ms X can seek a further review of its decision in the event she remains dissatisfied at the end of the review.
42. Finally, I the Council has agreed to also try and learn wider lessons from this complaint. Within three months of a decision on this complaint it will write to us and tell us what action it has taken:
1. to ensure that it has a process in place to record outstanding enquiries or complaints about decisions taken by its non-domestic rates service to ensure:
1. those making such enquiries/complaints receive advice on how long it anticipates taking to answer their enquiries/complaints; and
2. how it will keep in touch if it is unable to keep to such timescales;
2. to give advice to officers deciding whether to apply the ERD on the appropriateness, relevance and limitations of basing decisions on eligibility through use of measurements of floorspace.

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Final decision

43. For reasons set out above I uphold this complaint finding fault by the Council causing injustice to Ms X’s business. The Council accepts these findings and has agreed action that I consider will remedy the injustice. Consequently, I can complete my investigation satisfied with its response.

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Investigator's decision on behalf of the Ombudsman