William Eichler 17 October 2019

Ombudsman criticises councils for how they chased historic business rate debts

Two London councils have been criticised by the Local Government and Social Care Ombudsman for the way they tried to recover historic business rate debts.

In one case, the London Borough of Islington had tried to recover debts going back to the early 2000s from a woman who told the council she was not liable.

Ombudsman Michael King’s investigation concluded that the council was at fault for delaying trying to trace the woman for 16 years. The delay meant the woman was not able to challenge the decision because she no longer had the evidence.

In another case, London Borough of Haringey decided to start bankruptcy proceedings against a woman for business rates of more than £50,000 based on an incorrect assessment of her assets, including the value of her home.

Mr King concluded that the council would not have started bankruptcy proceedings had it done its calculations properly and followed its policy.

‘While councils have every right to pursue people who do not pay their tax or business rates, they should also do this without undue delay and not let debts drift to such an extent.

‘Any decision to pursue an historic debt should be based on sound evidence it is fair, appropriate and reasonable to do so.

‘To take someone to court for bankruptcy is a very serious matter and, in the Haringey case, the council based its decision on a flawed assessment. This has had significant financial and emotional consequences for the woman.

‘I now call on both authorities to consider my recommendations and accept the improvements I have recommended they make.’

A spokesperson for Islington council responded: ‘We accept the Ombudsman’s findings and have agreed to write off the debt, to reimburse money paid by the individual and to make a payment in acknowledgement of the case.

‘We are also reviewing our council tax and business rate collection policies to take the findings into account.’

A Haringey Council spokesperson said: 'In response to the report, we have agreed to pay the debtor £3,400 and accept that we made a miscalculation in the original valuation of the property. We want to be clear that we would only ever pursue bankruptcy orders as a last resort and understand that this can cause distress. However, the debtor still owes the council a substantial sum of money which we have been unable to recover over a number of years.

'We have been – and will continue to be – in communication with the debtor about finding a way forward.'

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