Home
 » ISP News » 
Sponsored Links

UK Fibre Optic Tax – BT and Virgin Media Fear £1.3bn Business Rates Hike

Saturday, Feb 18th, 2017 (8:09 am) - Score 6,344

The Valuation Office Agency‘s imminent “revaluation” of business rates (due to take effect from the 1st April 2017) could do more harm than good to the roll-out of fibre optic broadband, not least by hitting BT and Virgin Media with a £1.3bn tax hike on existing infrastructure over the next 4-5 years.

According to The Times (Paywall), the extra cost effectively represents a lost investment that the operators’ suggest could be enough to “upgrade more than two million homes to superfast internet.” We suspect the use of the word “superfast” (usually meaning speeds of 24 or 30Mbps+) is the newspaper’s own interpretation and so should be taken with a pinch of salt. Otherwise the claimed two million figure is not clearly defined.

The tax hike will also hit other fibre optic operators’ too, such as Cityfibre, which has already called the VOA’s current system “broken.” A spokesperson told ISPreview.co.uk last year, “Current VOA policy taxes the fibre connections of smaller operators at a considerably greater rate than BT and Virgin. This is a massive institutionalised distortion of competition, out of step with other Government policy and a barrier to investment in the UK’s broadband infrastructure.”

Meanwhile Virgin Media has previously expressed to us that the change amounts to a “quadrupling of our rateable value“.

Richard Hooper, Chair of the Broadband Stakeholder Group, told ISPreview.co.uk last year:

“The Government and industry are clear that we want to continue to invest to support the world-class connectivity that our economy needs to succeed. This huge increase in business rates on broadband networks by the VOA goes against that objective and introduces instability and risk at a time that we need it least.

The Government needs to consider how to mitigate this impact and work to ensure that the whole of the public sector is working to encourage rather than deter investment.”

On the other hand the Government has already proposed some positive changes, such as the plan to introduce a 5 year relief from business rates on new fibre optic / broadband infrastructure and this will run from 1st April 2017 (details). However they suggest that this will only produce “a saving of £60 million“, which is but a drop in the ocean of what their hike will do to existing infrastructure.

The rate hike also eclipses the Government’s recent investment of £400m into a new Digital Infrastructure Investment Fund (DIIF) that is designed to support alternative broadband ISPs (here), which once matched with private investment could be worth up to £1.5bn and aims to help an extra 2 million premises gain access to ultrafast style broadband (FTTP/H) connectivity (i.e. same sort of figure as the opening claim from BT and Virgin Media).

Even the Government’s former Digital Minister, Ed Vaizey MP, has said that the rates hike “goes in completely the opposite direction” from what he had planned in terms of a “business rate exemption for a period for new-build broadband.” Instead the new Chancellor, Philip Hammond MP, seems set to give with a pinch from one hand and take away with a shovel from the other.

However it’s worth pointing out that the revaluation effort impacts all businesses in England and Wales, at least those that pay business rates. The Government claims that this process is “revenue neutral,” which means that some businesses will see their rates going down, while others should see the bill go up and the end result will not return extra revenue to HM Treasury.

Sajid Javid MP, Communities Secretary, said:

“Our regions have huge economic potential, and can be a catalyst to driving economic growth across the country.

The revaluation of business rates will help make sure bills are accurate, with nearly three-quarters of businesses seeing a fall, or no change. In fact, the generous reliefs we are introducing mean that 600,000 small businesses are paying no rates at all – something we’re making permanent so they never pay these bills again.

And across the country, there’s also a £3.6 billion scheme to support companies affected by the business rates revaluation.”

Digital infrastructure developers that deploy new fibre optic broadband networks often have to consider longer-term investment models that work over periods of 5-15 years, which means that not even the short 5 year rates holiday can stop the forthcoming hike from acting as a longer term disincentive.

The hope now is that next month’s Budget 2017 announcement, while perhaps not adding anything new for broadband specifically, could produce further changes that might help to soften the impact. Some improvements have already been proposed (here), but large broadband builders will be hoping to see something a bit more significant.

UPDATE 19th Feb 2017:

The official press notice from Virgin Media also includes a quote from Ovum (below) and notes that the 2 million+ homes claim equates to a potential population of 5 million people who could be connected to ultrafast broadband (i.e. a typical UK home has 2.3 people per household). The snapshot notes that 5 million is “more than the populations of England’s 10 biggest cities after London (Birmingham, Leeds, Sheffield, Bradford, Manchester, Liverpool, Bristol, Newcastle, Sunderland, Wolverhampton).”

Matthew Howett, Telecoms Analyst at Ovum, said:

“At a time when the government is trying to encourage private sector investment in the next generation of broadband infrastructure and reduce the digital divide, it’s a backwards step to hike business rates and not think this will directly affect the number of additional premises that could be connected.”

Mark-Jackson
By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on X (Twitter), Mastodon, Facebook and .
Search ISP News
Search ISP Listings
Search ISP Reviews

Comments are closed

Cheapest Ultrafast ISPs
  • Gigaclear £17.00
    Speed: 200Mbps, Unlimited
    Gift: None
  • Zzoomm £19.95
    Speed: 150Mbps, Unlimited
    Gift: None
  • YouFibre £19.99
    Speed: 150Mbps, Unlimited
    Gift: None
  • Community Fibre £20.00
    Speed: 150Mbps, Unlimited
    Gift: None
  • BeFibre £21.00
    Speed: 150Mbps, Unlimited
    Gift: £25 Love2Shop Card
Large Availability | View All
Cheapest Superfast ISPs
  • Hyperoptic £17.99
    Speed 33Mbps, Unlimited
    Gift: None
  • UtilityWarehouse £19.99
    Speed 35Mbps, Unlimited (FUP)
    Gift: None
  • NOW £24.00
    Speed 63Mbps, Unlimited
    Gift: None
  • Vodafone £24.00
    Speed 73 - 82Mbps, Unlimited
    Gift: None
  • Shell Energy £24.99
    Speed 38Mbps, Unlimited
    Gift: None
Large Availability | View All
The Top 20 Category Tags
  1. FTTP (5388)
  2. BT (3490)
  3. Politics (2494)
  4. Openreach (2275)
  5. Business (2222)
  6. Building Digital UK (2215)
  7. FTTC (2038)
  8. Mobile Broadband (1940)
  9. Statistics (1763)
  10. 4G (1639)
  11. Virgin Media (1591)
  12. Ofcom Regulation (1438)
  13. FTTH (1379)
  14. Wireless Internet (1378)
  15. Fibre Optic (1376)
  16. 5G (1215)
  17. Vodafone (1126)
  18. EE (1111)
  19. TalkTalk (927)
  20. O2 (916)
Promotion
Helpful ISP Guides and Tips
»
»
»
»
»
»
»
»
»
»
»
»
»
»
»
»
»
»
»
»
»
»
»
»
»
»
Sponsored

Copyright © 1999 to Present - ISPreview.co.uk - All Rights Reserved - Terms , Privacy and Cookie Policy , Links , Website Rules , Contact
Mastodon