Fat fibre taxes strangling us – UK broadband providers

'A real kick in the cabinets', moans Virgin Media exec

Broadband providers have hit out against a forthcoming hike in business rates which will dramatically increase the tax paid on fibre optic networks.

The increase in tax is decided by the Valuation Office Agency, which sets rates for all businesses accessing land. The body is in the process of updating the rateable values of all business properties, with new rates set to come in force in 2017.

It is understood the rates were reviewed a couple of months ago and all those who had to pay were notified individually.

However, providers have complained they will be disproportionately hit by the increase in rates – which could have an adverse impact on fibre roll-out.

One insider suggested the reason for the increase in rates was because the VOA did not believe Virgin is currently paying enough in business rates. Virgin Media recently pledged to invest £3bn in expanding its superfast network to serve four million premises.

Brigitte Trafford, chief corporate affairs officer at Virgin Media said: “The Valuation Office Agency’s proposed quadrupling of the rates Virgin Media pays on its network assets is a real kick in the cabinets at a time when ministers are calling for more investment in broadband – a call we are answering to the tune of £3bn.

"The VOA should reconsider its modelling to ensure broadband providers are treated proportionately and incentivised not penalised for building infrastructure that supports the UK’s digital future.”

The Secretary General of the Internet Services Providers' Association (ISPA) also criticised the plans: “ISPA members are investing heavily in rolling out networks and delivering the connectivity UK homes and businesses need, and the VOA needs to recognise that increasing charges makes this more difficult”.

Small broadband provider CityFibre claimed it pays between 10 and 30 times the tax charges of BT for a comparable fibre connection given the methods by which the VOA calculates its rateable value. We've contacted BT for comment about this.

Mark Collins, director of strategy at CityFibre, said: “The system favours scale and size and BT can pass on its costs to customers through wholesale charges.

"If the government is trying to encourage fibre investment and competition, then we should not be taxed in a way that proves to be a disincentive. It is clear that reforms to the rating system must be implemented urgently."

Matthew Hare, chief exec of rural broadband provider Gigaclear, said it will not immediately be affected by the changes to the rates, because rural fibre-to-the-premise is rated differently by the VAO. But he said it would be "extremely poor" if they were not able to use BT dark fibre products due to be made available later this year as a result of the changes.

The Register has contacted the VOA for a comment. ®

Update

A VOA spokesman said the body does not comment on individual cases. He added: "We use open market rental evidence where available as the basis for our values, however where properties aren’t typically rented we will use alternative recognised valuation methods, such as a receipts and expenditure or contractors basis. This approach has not changed.”


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