Many small businesses could be losing out on millions of pounds of rate relief because local authorities are failing to follow government guidance.

Under the Small Business Rate Relief Scheme (SBRRS), eligible businesses in England can claim as much as 50 per cent off their rates bills provided their property has a rateable value of less than £5,000.

As the rateable value of the premises rises so the level of relief declines correspondingly on a scale of 1 per cent for every £100 of rateable value over £5,000 and up to £10,000. When the rateable value reaches £10,000, the relief is 0 per cent. Similar schemes also operate in Scotland and Wales.

The relief, which applies to one property only, is not automatic, and businesses must apply to their local authorities to claim the saving.

However, concerns have arisen that large numbers of businesses are losing out on the scheme because some local authorities have imposed outdated deadlines on submitting claims.

Two years ago, the Department for Communities and Local Government (DCLG) abolished the ruling that claims had to be submitted within six months of the end of the tax year. That would have meant making an application by 30 September this year to claim for 2007/08.

Instead, the DCLG introduced a rule that allowed applications to be made once every rates valuation period.

That gives businesses until 30 September 2010 to claim rate relief covering the years since 2007/08, a spokesperson for the DCLG has said.

The DCLG said that it has issued guidance and information letters to councils making it clear that the submission rules have changed.

Despite this, several local authorities have retained the old submission dates, indicating that any business which did not meet the 30 September deadline cannot claim the relief.

Somewhere in the region of 870,000 businesses qualify for the relief, but the Local Government Association recently estimated that only half are claiming their tax breaks.