Councils are being forced to write off millions of pounds in unpaid business rates due to a legal loophole, town hall chiefs have warned.

The Local Government Association (LGA) said some councils are faced with business rate debts of nearly £1.5m, with licensed premises exploiting a loophole in licensing and business laws.

The LGA is calling for councils to be given the power to suspend the licenses of businesses that ‘wilfully or persistently’ fail to pay their business rates.

It also wants a change in the law to prevent companies from going bankrupt, only to start again overnight with the same directors in place.

Cllr Simon Blackburn, the LGA’s Licensing spokesman, said:

“The Government should close the phoenix company loophole by making it a legal requirement for directors of bankrupt companies who start up a new business to pay their old company’s business rate debts.

Giving council powers to refuse or suspend a premises licence at an earlier stage of the debt recovery process would be a simple way to tackle this problem and protect local services.”