Guidance

Business Recovery Grant: guidance for local authorities on irregular payments, returning recovered grants and referring outstanding debts to DBT

Published 16 January 2024

Applies to England

1. Introduction

1.1 This scheme is part of a wider UK government response to severe flooding events.

1.2 All local authorities who are determined by government to be eligible to receive support under the flood recovery framework (FRF) will be provided with funding by the Department for Business and Trade (DBT) through Section 31 of the Local Government Finance Act to deliver a Business Recovery Grant (BRG) scheme within their local area.

1.3 Guidance documents were provided to support local authorities in administering the grant scheme which include eligibility requirements for the scheme.

1.4 Local authorities are required to satisfy DBT that the funds have been issued in a compliant manner in line with the HM Treasury guidance document managing public money, and must complete assurance activity on all grants awarded to check that the recipient was eligible to receive the funds and that the funds were paid correctly and within the correct timeframe.

1.5 Where a local authority identifies an irregular payment, it must attempt recovery. This document provides guidance to local authorities on the debt recovery processes to be followed, including the minimum debt recovery requirements, and the process for returning successfully recovered funds / referring outstanding debts to DBT.

2. About this guidance

2.1 This guidance sets out the criteria which local authorities must consider as they manage irregular payments.

2.2 This guidance sets out the reasonable and practicable steps local authorities must undertake to reclaim grants paid in error, non-compliantly or to someone who has made a fraudulent claim. It also provides guidance to local authorities on the processes to follow should the reclaim be unsuccessful.

2.3 Local authority enquiries should be addressed to BusinessGrantsAssurance@businessandtrade.gov.uk.

3. Background

3.1 Local authorities have a responsibility to provide assurance to both themselves and the department to minimise the risk of errors, fraud and over-payments.

3.2 The department will stand behind any irregular payments, subject to local authorities that have:

• taken all reasonable and practicable measures as set out in the eligibility checklist guidance to avoid making payment to ineligible businesses or fraudulent applications
• taken all reasonable and practicable steps to avoid making duplicate payments to eligible businesses
• taken all reasonable and practicable steps as set out in this guidance to recover any ineligible, fraudulent or incorrect payments

3.3 Where a local authority can evidence that it took all reasonable and practicable steps in line with the published guidance, the department will be accountable for any sums not recovered.

3.4 Where the department determines that the local authority has failed to award grants in a reasonable and practicable manner or has not undertaken reasonable and practicable recovery action, the department shall require the local authority to repay the relevant grant amount. Final decision on liability rests with the department.

4. Identifying irregular payments

4.1 Where a local authority identifies that a grant payment was irregular, it must determine whether the payment was made because of (one of the following):

(i) error

(ii) non-compliance

(iii) fraud

A local authority must attempt recovery on any grant payment identified as irregular regardless of the reason.

4.2 When a local authority identifies that a payment was made in error (for example a duplicate payment or where payment has been made to an incorrect bank account) it must consider the risk that the error was repeated and undertake checks to other grant payments to ensure that all such incidents are identified and that steps are in place to prevent it happening on further schemes.

4.3 A local authority must instigate recovery on all grants paid in error, and the reasonable and practicable steps as detailed in section 6 below must be followed by a local authority to attempt to recover a grant awarded in error.

4.4 If a grant paid in error is not recovered it can be referred to DBT if the local authority follows the minimum recovery process set out in this guidance. The local authority must complete Annex B for any debt referred and set out clearly in that document why the referral sits under error.

Non-compliance

4.5 When a local authority identifies that an award of grant was non-compliant (for example where the business receiving the grant did not satisfy the scheme eligibility criteria) it must determine whether it was intentional on the part of the business or a misunderstanding or misinterpretation of guidance. If the non-compliance by the business is considered intentional then this must be treated as fraud.

4.6 A local authority must instigate recovery on all grants judged to be non-compliant, and the reasonable and practicable steps as detailed at paragraphs 6.1 to 6.7 below must be followed by a local authority to attempt to recover a non-compliant grant.

4.7 If a grant paid and identified as being non-compliant is not recovered, it can be referred to DBT if the local authority follows the minimum recovery process set out in this guidance. The local authority must complete Annex B for any debt referred and set out clearly in that document why the referral sits under non-compliance.

Fraud

4.8 Where a local authority identifies actual or suspected fraud related to the award or payment of a Business Recovery Grant it must follow the following minimum steps:

• it must investigate the fraud in line with its own anti-fraud procedures and may wish to pursue referral of the case to local police, however this latter is at the Local Authority’s discretion
• it must instigate recovery of any grant paid, and the reasonable and practicable steps as detailed at paragraphs 6.1 to 6.7 below must be followed by a local authority to attempt to recover a fraudulent grant

4.9 If the local authority is unable to recover a debt related to actual or suspected fraud, it can be referred to DBT if the local authority follows the minimum recovery process set out in this guidance. The local authority must complete Annex B for any debt referred and set out clearly in that document why the referral sits under fraud and the outcome of its own investigation.

4.10 DBT will not accept a referral related to fraud without all these criteria being met.

5. Reasonable and practicable steps in awarding grants

5.1 Local authorities are required to retain appropriate evidence to demonstrate that all reasonable and practicable steps were followed in the award of a Business Recovery Grant.

5.2 DBT has issued eligibility checklist guidance to support local authorities in determining what actions are reasonable and practicable in reviewing the payment of grant awards.

5.3 The eligibility checklist guidance sets out the minimum level of eligibility checks that local authorities must complete to provide assurance to both themselves and DBT that they have addressed the risk of error, non-compliance and/or fraud.

5.4 The eligibility checklist guidance requires local authorities to retain evidence for a minimum of 7 years from the date of application, to demonstrate that the minimum checks have been followed.

6. Reasonable and practicable steps regarding obtaining repayments

6.1 Local authorities are required to demonstrate they have undertaken all reasonable and practicable steps to reclaim incorrectly paid grant funds. To meet this requirement, local authorities must undertake a minimum three-step approach to try and recover any irregular payments.

6.2 If a local authority has its own debt recovery process this can be followed – but it must include a minimum 3 step opportunity for grant recipients to repay.

6.3 If a local authority does not have its own debt recovery process, the following process must be followed:

• raise an invoice with the Grant Recipient to create the debt. The invoice must clearly set out the reason why the grant is to be repaid and a deadline for repayment.

• send a reminder letter to the grant recipient if the invoice remains unpaid. The letter must provide a further deadline date for payment or response and include a copy of the original invoice. The reminder should be sent within 28 days of the elapsed deadline originally set.

• send a final reminder letter. This must include another copy of the original invoice and a response deadline date and should be sent within 28 days of the elapsed deadline given in the reminder letter.

6.4 For best practice local authorities should also include:

• signposting to a source of free independent debt advice services, such as the Citizens Advice, Stepchange the National Debtline, and Business Debtline

• details of the escalation route that might be taken (for example, local civil recovery, passing recovery back to central government for debt recovery action to be considered)

• point of contact details for discussion

6.5 Local authorities must be flexible and have a repayment system which would offer grant recipients the opportunity to pay back in instalments if required. Repayment should be secured as soon as possible, and where possible within one year of the original invoice being raised, but a period of up to 2 years or no later than 31 March 2026 (which ever date is soonest) can be agreed without reference back to DBT. Any proposed repayment term outside of this will have to be agreed in writing with DBT before it can be finalised with a business.

6.6 Local authorities are required to keep a record of all communication in relation to the irregular payment, including any response from the grant recipient, together with evidence which validates the reasons why the local authority deemed the grant recipient was not entitled to the grant.

6.7 Local authorities must in all cases attempt a minimum of 3 steps to meet the reasonable and practicable criteria. Local Authorities are welcome to take additional steps in line with their own debt recovery process, this would not prejudice later referral to DBT if the debt could not be recovered.

7. Returning funding to DBT

7.1 Where funds have been successfully recovered, the local authority must complete the template at Annex A and return to businessGrantsAssurance@businessandtrade.gov.uk.

The department will then provide a formal request for the funds, along with details of where to send payment and a unique reference number to be used.

7.2 If a repayment plan is agreed with a business, the first repayment must be paid to DBT via the Annex A template as soon as possible after the funds are received from the business.

After that, local authorities can choose the frequency of future repayments back to DBT until the debt is repaid in full. The local authority must set out on the Annex A template, the frequency of future repayments.

7.3 Local authorities only need to complete and return Annex A when they are in a position to return relevant funding, nil responses are not required.

8. Referring debts to DBT

8.1 Where a local authority has taken all reasonable and practicable steps as outlined above but has been unable to recover the irregular payment, the local authority must complete the template at Annex B and return to BusinessGrantsAssurance@businessandtrade.gov.uk for agreement on liability to pay the grant and further recovery activity.

8.2 Failure to provide the full detail requested at Annex B will delay DBT confirming liability and next steps for the debt and could result in a local authority being considered liable for a debt.

9. Assignment of debts

9.1 For DBT to accept and act on a debt referral, a precedent assignment agreement is required between DBT and the local authority, which assigns all causes of action in relation to incorrectly paid Business Recovery Grants to DBT. This is required as funds were allocated to local authorities through Section 31 of the Local Government Finance Act and it was the local authority who then administered the grants to end grant recipients, meaning any legal cause of action (in contract or otherwise) sits at the level of local authority to grant recipient.

9.2 Once a local authority refers its first debt to DBT, DBT will issue the precedent assignment agreement template to the local authority for signature and return. A precedent assignment agreement will only need to be signed once by each local authority to cover all Business Recovery Grant debts, setting out a framework for DBT taking formal responsibility for a debt.

9.3 If a local authority does not sign a precedent assignment agreement, then no debts related to Business Recovery Grants can be actioned by DBT and liability will remain with the local authority which may result in recovery action by DBT against the local authority.

10. Triage

10.1 DBT will complete an initial triage on all Annex B debt referrals received where a precedent assignment agreement has been signed by the local authority, and confirm to the local authority the next step – this will be one of the following:

10.2 DBT will confirm to the local authority whether it accepts the referral and the associated liability for the debt and whether it will attempt further recovery action with the business.

10.3 Where DBT accepts a referral, it will formally write to the business to:

• confirm that it has taken over recovery action from the local authority

• request that within 10 working days the business either repays the debt in full directly to DBT or agrees a repayment plan

• advise that the debt will be referred to a debt referral agency if no acceptable response is provided within 10 working days

10.4 Where DBT accepts liability for the debt but there is no realistic prospect of recovery, this will be recorded as unrecoverable.

10.5 There may be cases where DBT refuses a referral on the basis that the local authority has not acted in a reasonable and practicable manner in either the award or attempted recovery of the grant. In this situation DBT will formally write to the local authority to confirm and detail the reason(s) why it considers this to be the case and set out the process for any challenge of the decision and a 10-working day deadline to lodge any appeal.

10.6 When a decision to refuse a referral is confirmed as final, DBT may seek recovery of a debt from the local authority.

10.7 The triage will be based on detail provided by the local authority through Annex B and on the supporting documents requested at Annex B. If further information on a referral is required from a local authority, DBT will request this in writing.

11. Referring debts to a third-party debt recovery agency

11.1 Grants that are referred to DBT for further recovery action, and where DBT accepts that referral, will be assessed to determine the possibility of recovery – for example, if a business has gone into administration since receiving the grant, then full/any recovery may be unlikely.

11.2 Where the business continues to trade, the department may instruct a third-party debt recovery agency to undertake further recovery action.

11.3 Where the debt recovery agency reclaims the funding from a business, they will directly return the funding to DBT.

11.4 If the debt recovery agency is unable to reclaim the funds from a business, this will be referred to DBT to agree appropriate next steps.

11.5 DBT will not automatically update a local authority on progress with debt recovery, following confirmation of assignment of that debt.

12. Data protection

12.1 Local authorities will need to ensure they have appropriate data protection arrangements in line with the UK General Data Protection Regulation (UK GDPR) and the Data Protection Act 2018 to enable data about grants and applicants to be shared where this is necessary for the administration of the scheme, including debt recovery.

12.2 See the privacy notice, setting out how DBT will handle personal data for the business recovery grant.

12.3 Applicants should also be advised that, where relevant, data may also be shared with other enforcement agencies for the prevention and detection of crime.

Annex A: funds to be returned to DBT

Where a local authority has reclaimed funds to be returned to DBT, this template should be completed and returned to BusinessGrantsAssurance@businessandtrade.gov.uk.

Go to the business recovery grant returning funds template.

You should add a separate line for each individual grant recovered and ready for repayment.

Annex B: local authority debt to be referred

Go to the business recovery grant local authority debt to be referred form.

You should complete a new form for each debt to be referred.