Summary: Mr X complained about how the Council handled his business rates account, its recovery action, and its poor communication with him. There were some faults by the Council which caused injustice to Mr X. The Council will take action to remedy the injustice caused.

The complaint

1. Mr X complained about how the Council handled his business rates account. In particular Mr X said the Council:
1. did not properly consider his application for small business rates relief (SBRR) for the financial year 2022/2023
2. refused to apply the SBRR to his business premises from 4 November 2022 to 1 July 2023
3. passed his case to the enforcement agents for recovery action
4. poorly communicated with him and that the Council sent demand notices and reminders to a wrong address
5. refused to put recovery action on hold.
2. Mr X said the matter caused him significant distress, confusion, and financial strain.

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The Ombudsman’s role and powers

3. 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)
4. 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)
5. 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)
6. An organisation should not adopt a blanket or uniform approach or policy that prevents it from considering the circumstances of a particular case. We may find fault in the actions of organisations that ‘fetter their discretion’ in this way.
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)

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What I have and have not investigated

8. I have investigated matters from November 2022 to February 2024. This covers the period from when Mr X obtained his business premises lease to when the Council issued its final response.
9. I have exercised discretion to investigate matters from November 2022. This is because Mr X became aware of the issues complained of in November 2023 when he received an enforcement agent’s visit notification letter.
10. I have not investigated matters relating to Mr X’s business rates for the financial year 2024/2025. This is a new and separate matter from the original complaint Mr X made to the Ombudsman.

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How I considered this complaint

11. I discussed the complaint with Mr X and considered the information he provided. I also considered the information the Council provided in response to my enquiries.
12. I sent Mr X and the Council a copy of my draft decision and considered all comments received before reaching a final decision.

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What I found

Law and guidance

13. 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.
14. The Valuation Office Agency (VOA) decides the rating for a property, the rateable value, and the date each property enters and leaves the rating list. If someone wants to challenge the VOA’s decision they have the right of appeal to the Valuation Tribunal.
15. Small business rate relief (SBRR) is awarded if a business has one property, and its rateable value is less than £15,000. If the business has more than one property it can still get SBRR on the main property if none of the other properties has a rateable value above £2,899 and the total rateable value of all the properties is less than £20,000 (£28,000 in London).
16. Empty business properties get 100% unoccupied rate relief for three months from the date the property becomes empty, and industrial properties get six months.
17. 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.
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:

• Compliance stage fees - Upon receipt of the instruction from the local authority the enforcement company must send a Notice of Enforcement giving the debtor a minimum of seven clear days to pay before a visit can be made. The debtor can make a payment proposal following the Notice of Enforcement. The enforcement company adds a compliance stage fee of £75 to the debt.
• Enforcement stage fees - If the debtor does not pay during the compliance stage or they default on a payment arrangement, the enforcement company will pass their account to an individual Enforcement Agent (EA). The EA will visit the debtor’s property for the purpose of taking control of their goods. At the time of the visit, an enforcement fee of £235 is added to the debt.
• Enforcement uplift fees – is where a 7.5% extra charge is applied to debts over £1,500.

Key events

20. Mr X obtained a lease for his business premises on 4 November 2022, but the business did not open until 1 July 2023.
21. In May 2023, the Council sent Mr X a bill of £17,334.44 for his business rates arrears which covered the period from 4 November 2022 to 31 March 2024. The bill was calculated at £5,108.94 and £12,225.50 for financial years 2022/2023 and 2023/2024 respectively.
22. In early and late June 2023, the Council sent a demand notice and a reminder to Mr X for his outstanding business rates charges. The Council sent the bill and notices to the registered address of Mr X’s business as contained in the lease agreement.
23. In September 2023, a liability order was issued for Mr X’s business rates arrears. An additional fee of £167 for the cost of the summons was added to the bill which made it a total of £17,501.44. The same month, Mr X attempted to submit an online application for a small business rates relief (SBRR). Mr X notified the Council of the difficulties he experienced with his online application.
24. In October 2023, the Council responded to Mr X and explained his business premises did not qualify for a further relief. It said this was because charges had automatically been calculated in line with the lower small business multiplier and that the rateable value of £24,500 was above the threshold. The Council also explained his business was not qualified for the SBRR because Mr X had another business property with a rateable value of £13,000.
25. The Council continued to chase Mr X for the arrears, and it referred the case to an enforcement agency (EA) in November 2023. A notice of enforcement to recover a total of £17,581.44 (inclusive of a £75 compliance fee) was sent to the registered address of Mr X’s business.
26. In mid-November 2023, Mr X made enquiries by the Council. Mr X asked:

• how the Council calculated his business rates given the fact his business did not open until 1 July 2023
• what relief his business was eligible for and how the £24,500 rateable value was reached
• if a 75% retail relief discount was applied to his business account
• the Council to reinstate his business rates. He submitted some documents to support his case and asked if the Council could set up a reasonable payment plan.

27. Mr X chased the Council for its response to his enquiries and when he did not receive any, he made a formal complaint to the Council. Mr X complained about how the Council had dealt with his business rates, its recovery action, its poor and unclear communication with him and he alleged it sent the bills and notices to a wrong address. Mr X said the matter caused him undue stress, worry and financial strain.
28. In its responses to Mr X’s enquiries and complaint, the Council:
1. apologised for its delayed response to Mr X.
2. advised Mr X how it calculated the rateable value and it attached the VOA rateable value link for reference.
3. said it had previously explained why Mr X’s business did not qualify for SBRR.
4. said Mr X’s business premises was entitled to a maximum of three months unoccupied exemption but that it records showed the exemption had already been applied to the premises from end of June 2022 when it had been unoccupied. The Council acknowledged this was before Mr X obtained the lease in November 2022, but it explained that changes of ratepayer do not entitle the new ratepayer to a fresh three-month exempt period. Therefore, Mr X was not entitled to the reduction and became liable from 4 November 2022.
5. said it sent Mr X’s bills and statutory documents to the registered address of his business as contained in the premises lease.
6. explained when Mr X did not make any payments towards his outstanding bill, it had to refer his case to the EA for recovery action.
7. said it had applied a 75% retail relief from July 2023 to March 2024 which reduced Mr X’s bill by £6,677.08. The Council said it would notify the EA of the reduction and Mr X’s new total of £9,974.46 for financial years 2022/2023 and 2023/2024, so it could recover the outstanding amount.
29. The Council sent Mr X his revised business rate bill. The revised bill showed the Council applied a zero‑relief exemption for the three-month unoccupied period from 4 November 2022 to 31 March 2023 and then another from 1 April 2023 to 30 June 2023. But the Council applied the 75% retail relief to the bill from 1 July 2023 to 31 March 2024.
30. The EA continued to chase Mr X for his outstanding bill. Mr X was asked to pay £1,000 per month to offset the £9,974.46 arrears.
31. Mr X queried why the Council applied the 75% retail relief from July 2023 and not from April (the start of the 2023/2024 financial year). He questioned why the Council passed his case to EA which resulted in an additional cost of approximately £2,000 and he complained the £1,000 monthly payment plan was not affordable and sustainable. Mr X asked the Council to escalate his complaint and asked it to put the recovery action on hold until a mutually agreeable payment plan was reached.
32. The Council placed the recovery action on hold until 5 March 2024.
33. The Council replied to Mr X and reiterated the content of its stage 1 response. It said it had properly dealt with Mr X’s bills and followed the correct recovery process in line with the business rates legislation. The Council acknowledged Mr X’s point about the £1,000 monthly payment plan but it urged him to make the monthly payments to the EA so as to avoid paying the lump sum towards the end of the financial year. The Council attached the breakdown of how it calculated Mr X’s bill (£9,094.87) and the additional EA fees which included the compliance (£75), enforcement (£235) and the enforcement uplift (£699.70) fees.
34. Mr X remained dissatisfied with the Council’s responses and how it had handled his business rates. He made a complaint to the Ombudsman.
35. The Council provided the Ombudsman with additional information about how it calculated the £699.70 enforcement uplift fees in Mr X’s case.

Analysis

Business Rates Reliefs

36. The Council considered the available information it had in line with the VOA rateable value and found Mr X did not qualify for SBRR for financial years 2022/2023 and 2023/2024. The Council explained to Mr X in October 2023 the reasons his business was not eligible for SBRR. This was not fault.
37. The Council considered, decided, and informed Mr X that his business was not entitled to the three-month unoccupied relief exemption. This was because the Council had already applied the 100% three‑month exemption relief to the premises in June 2022 when it became unoccupied.
38. I note Mr X’s point that the Council should have applied the exemption relief from 4 November 2022 when he obtained the premises lease. However, the Council had explained to Mr X, that changes of ratepayer do not entitle the new ratepayer to a fresh three-month exempt period. Therefore, I find the Council correctly applied the three-month empty exemption relief in Mr X’s case and it was not fault.
39. Furthermore, the Council applied the 75% retail relief to Mr X’s bill for the financial year 2023/2024 (from 1 July 2023 to 31 March 2024) which reduced Mr X’s bill by £6,677.08. This was not fault. This is because the retail relief only applies to occupied properties, therefore the Council only applied the relief to Mr X’s business from 1 July 2023 when the business opened.
40. But I find the Council applied the 75% retail relief in December 2023 after Mr X complained to it and after it had passed his case to the EA in November 2023. The Council’s delay in applying the retail relief was fault. The Council issued Mr X with his revised bill, and it also notified the EA of the adjusted arrears after the retail relief was applied. The Council had apologised to Mr X, and I find this is proportionate and in line with our guidance on remedies.

Recovery Action

41. The Council sent Mr X’s business rate bills and all statutory documents to the registered address of his business as contained in the premises lease. This was not fault. And I find it was reasonable for Mr X to have anticipated he would receive a business rates bill and be required to make payments to the bill.
42. The Council first issued Mr X’s bill in May 2023 and continued to chase Mr X for the payment until November when it passed the case to the EA to recover the outstanding bill. This is a decision and action the Council is entitled to take, and it was not fault. Mr X was given the statutory timescale to make payments before his case was referred to the EA.
43. Mr X also complained about the Council’s reluctance and its refusal to place the recovery action on hold. The Council considered and instructed the EA to place the recovery action on hold until 5 March 2024. This was after Mr X requested the Council to do so during its investigation into his complaint. This was not fault. This is because councils are entitled to decide whether they wish to put recovery action on hold and the Ombudsman cannot question the Council’s decision if it has followed due process in making its decision.
44. I am unsure where the £2,000 EA additional fees Mr X complained was added to his bill came from. But there was no fault with how the Council applied the additional compliance and enforcement stages fees to Mr X’s bill. Further evidence provided by the Council also shows there was no fault with how it calculated the “enforcement uplift” fees. I find this was calculated in line with the provisions of The Taking Control of Goods (Fees) Regulations 2014. Therefore, there were no faults with how the Council applied EA additional fees to Mr X’s bill.
45. However, I find fault by the Council with how it dealt with Mr X’s review request of the £1,000 monthly payment plan to the EA which he said was unaffordable and unsustainable. I find the Council was fettering its discretion when it maintained the payment must be at that level so Mr X could clear his outstanding bill by the end of the financial year. There was no evidence to show it properly considered Mr X’s circumstances before it made its decision which appeared to be more about its administrative convenience. The Ombudsman criticises councils for fettering discretion. In this case, I find the Council was rigid by insisting on Mr X clearing his business rate arrears by the end of the financial year. This was fault as there is no absolute requirement in law or regulations supporting the Council’s rationale. This caused distress and worry to Mr X.

Council’s communication with Mr X

46. The Council already accepted and apologised for its delays in responding to Mr X’s enquiries between November and December 2023. This was fault which caused Mr X uncertainty and frustration. But I find the Council’s apology is proportionate to remedy the injustice caused and it is in line with our guidance on remedies.

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Agreed action

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

• apologise in writing to Mr X and make him a symbolic payment of £100 to acknowledge the injustice caused to him by the Council fettering its discretion about the payment plan. The apology should be in accordance with our guidance, Making an effective apology
• review Mr X’s £1,000 monthly payment plan. The Council should consider Mr X’s personal circumstance and set up an affordable payment plan with him to support him clear his arrears
• by training or other means, remind relevant staff to ensure they take debtors’ individual circumstances into account and to avoid adopting a blanket approach when setting up debtors’ payment plans.

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

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Final decision

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

Investigator’s decision on behalf of the Ombudsman

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Investigator's decision on behalf of the Ombudsman