The Con-Dems admitted yesterday that some tenants hit by the hated bedroom tax are exempt under little-known regulations revealed by the Star.

The Department for Work and Pensions (DWP) confirmed tenants who have claimed housing benefit for the same property since 1996 are exempt.

Work and Pensions Secretary Iain Duncan Smith's embarrassing climbdown comes after the Star reported last month that housing benefit regulations passed in 2006 provided a loophole.

Now local authorities have been ordered to refund those who have lost out on housing benefit since the bedroom tax came into force on April 1.

A DWP bulletin told councils to "identify potentially affected claimants" and "remove the under-occupancy reduction in the claimant's housing benefit."

A spokesman for the department insisted it expected "very few people to be affected."

But Labour MP Ian Lavery said the bedroom tax loophole exposed "just what a shambles Duncan Smith's department really is in."

He said: "It's had a shambles with the hated bedroom tax, it's in a shambles with universal credit. To be honest, it's about time Cameron booted Duncan Smith out of office instead of being totally frightened of him and hiding from him."

Mr Lavery will introduce a 10 minute rule Bill in Parliament on January 21 to give all MPs the chance to vote to scrap the bedroom tax, though such Bills rarely reach the statute books.

He said: "If passed, it would get rid of the bedroom tax in its entirity, regardless of loopholes, regardless of reassessments."

The instructions to councils also indicate Mr Duncan Smith could introduce new legislation of his own to close the loophole.

They said the department was now aware tenants were protected by the regulations but would "be taking steps to remedy this shortly."

Benefits expert Peter Barker said the exemption could hand a reprieve to "a significant number" of tenants when it was revealed last month.