Councils are losing £250m a year due to businesses avoiding paying their rates, new research has found.

A survey by the Local Government Association (LGA) found eight in 10 councils said they do not have enough power to tackle the problem.

Almost half of respondents said the practise of ratepayers using rates mitigation firms in return for a percentage of the rates saved was widespread.

The LGA called for tougher legislation to close loopholes, and wants councils to have new legal powers to enter and inspect non-domestic properties to verify information relevant to billing.

Chair of the LGA's resources board, Cllr Richard Watts, said: ‘Too many businesses are exploiting loopholes and manipulating the system to avoid paying the tax they owe.

‘The scale of business rates avoidance shows more needs to be done to tackle this behaviour and reduce avoidance.

‘Every penny lost through business rates avoidance is money that could be spent on adult social care, children's services, fixing roads and other vital community services.'

The Government said more than four years ago that the scale of the problem confirmed that business rates avoidance needed to be addressed, but no action has been taken.

However, the Welsh and Scottish Governments are in the process of preparing to introduce measures to tackle business rates avoidance.