Ombudsman criticises two London boroughs over way they sought to recover historic business rate debts

The Local Government and Social Care Ombudsman has criticised two London councils for the way they tried to recover historic business rate debts.

The LGO said that, in one case, the London Borough of Islington tried to recover debts going back to the early 2000s, despite the woman telling them she was not liable.

An investigation of the Ombudsman found the council at fault for delaying trying to trace the woman for 16 years. “This meant she was not able to challenge the decision because she no longer had the evidence.”

In the second case, the 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.

The Ombudsman’s investigation found the council would not have started bankruptcy proceedings had it done its calculations properly and followed its policy.

Following the LGO investigation Islington has agreed to:

• pay the woman £100 to acknowledge the avoidable time, trouble and frustration caused;
• reimburse £1,038.20 the woman paid;
• write off the debt; and
• review its council tax and business rate collection policy.

The LGO meanwhile called on Haringey to apply to annul the bankruptcy and pay the court and trustees costs.

The Ombudsman also called on the council to:

• pay the woman £3,000 to reflect the distress she suffered, and a further £400 because of its breaches of the Data Protection Act while dealing with her complaint;
• send a letter to the woman saying if it intends to recover the debt, the amount it is seeking to recover and how it is going to do this.

Local Government and Social Care Ombudsman, Michael King said: “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.”

King added: “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.”