Shopkeepers and other small business owners in England are set to lose more than £38m in business rates relief due to council errors, an exclusive Retail Express investigation revealed.

The £175.2m of funds – known as national discretionary rates relief – were supposed to help small businesses not covered by small business rates relief.

Retail Express investigated more than 120 local councils and found nearly half were incorrectly using the Government’s criteria for deciding how much funding each council should get, to decide what businesses deserve relief.

The criteria looked at how many properties in each area had a rateable value of less than £200k and a rate increase of more than 12.5%, however this included thousands of buildings that could not receive relief such as those owned by charities, public bodies or large corporations. 

This means that when this criteria is used to hand out the funds, often more than 50% cannot be spent and small businesses that fall below the 12.5% requirement are ignored. If councils fail to hand out the funds by April, the remaining relief money will be lost.

Chartered surveyor Ian B Sloan has spent months campaigning for councils to fix their systems. He told Retail Express: “Many council committee members have simply “rubber stamped” criteria without examining the consequences.”

He added that the true amount of relief wasted is likely to be much higher, as many more councils who are demanding applications, rather than handing out the relief automatically, are “in many cases getting less than 40% of their anticipated take-up”.

Federation of Small Businesses chairman Mike Cherry said the wasted relief was “truly shocking”. “Because of the series of delays, Government may need to provide some flexibility and look at measures that mean struggling small firms do not miss out on the unused funds,” he said. 

Responding to Retail Express’ findings a spokesperson from the Ministry for Housing, Communities & Local Government said the surplus was “not acceptable” and added “we are in contact with councils regarding their plans to ensure businesses receive the support they are entitled to.”

Retail Express previously revealed councils failing to hand out ever 1% of the rates relief funding in mid 2017, with local councils and central government both blaming each other.