Rates Relief for Small Business Owners
Friday 01 June 2012
Small business owners and landlords who have seen their rates rise substantially in the past couple of years are eligible for a reduction in their bill.
There are widespread reports of many small business owners having experienced big increases in their rates bills since 2010.
According to reports made in the French Parliament, landlords of furnished accommodation have been particularly hit badly, with some reporting rate increases of over 500%, to a level that has actually exceeded the rental income they receive. ''The risk in the future'', says Raymond Couderc, the UMP parliamentary senator for the Hérault department in Languedoc-Roussillon, ''is that these persons will either end their business activity or continue without declaring it.''
The source of the problem is the replacement in 2010 of the former system of business rates, called the taxe professionnelle, by the contribution économique territoriale (CET).
The new tax was meant to ease the rates burden on businesses, removing from the basis of assessment the value of machinery and plant used in the business (which penalised new investment), with a twin assessment that retained the rateable value of the business property with a new calculation based on the ‘added value’ generated each year.
Special provision was made for small businesses with a turnover under €500K pa, as they are assessed solely on the rateable value of the property used in the business.
However, as in some cases this might result in a negligible assessment, local authorities have been given discretion by the government to set a minimum level of rates payable by a small business.
For a those with a turnover below €100K this minimum level ranges between €203 and €2,030, a range that is updated each year in line with inflation.
It would seem that in order to protect their local revenue base some local authorities have set their minimum rates payable towards the upper end of this range.
The government did make specific provision for transitionary and on-going problems arising from the change, some of which is left to the discretion of the local councils.
There are four main forms of relief, as follows:
i. Seasonal Businesses - The minimum level of rates can be reduced by 50% for a seasonal business which operates less than nine months a year, subject to a decision to grant such relief by the local council.
ii. Inter-Communal Authorities – For those taxed on an inter-communal basis, where their rates bill for 2010 and 2011 exceeded that which they would have otherwise paid under the former system of taxation, then the business can be given a reduction in their bill to the level they would have paid under the old system for 2010. The rebate is only granted on specific application to the local inter-communal council.
iii. Large Increase – Elsewhere, those businesses who have suffered an increase greater than 10% and a minimum of €500 can obtain a reduction in their bill covering the period 2010-2013. The reduction is the difference between the taxes paid in 2010, increased by 10%, and the level of the new tax. The level of the reimbursement is on a decreasing scale - 100% for 2010, 75% for 2011, 50% for 2012 and 25% for 2013. Once again, you need to apply to obtain the relief.
iv. Low Turnover – Local authorities have been granted the power to reduce by 50% the level of the rates for those businesses with a turnover of less than €10,000 pa. For 2012 a decision to this effect must have been made by the local authority by 15th February 2012.
There are also a number of other general exemptions, which are set out below, most only availalbe to landlords, but also to those who run a business in a rural area.
i. Occasional Lettings - If you let furnished property only on an incidental basis you are not liable for business rates. Rates are only payable by a landlord who lets on a ‘habitual’ basis. In the event of dispute just what is ‘habitual’ is a matter that can only be determined on a case by case basis.
ii. Personal Property - Others who are exempt are those who only let out their own property (habitation personnelle), whether in whole or in part. Ordinarily, this would exclude a separate property in the grounds of the main residence, although not an annex.
iii. Rural Development Areas - An exemption for up to five years for any new registered business in rural development areas (Zones de Revitalisation Rurale (ZRR) in those communes with less than 2000 inhabitants.
iv. Low Rental - Other than holiday lettings, if you let out rooms in your property on a permanent basis to a tenant for whom the property is their main home then you are exempt from business rates.
Landlords of furnished lettings are liable for business rates even though they may not be formally registered as a business.
Those who run chambre d'hotes are also be liable for the taxe d'habitation on those parts of the property exclusively occupied by them.