Since April 2017 the UK Government has allowed broadband networks to claim 100% business rates relief on new fibre infrastructure, but this “Fibre Tax” holiday is about to expire and there’s been no indication of an extension. Some operators fear this will add “significant cost and uncertainty to the investment case for full fibre.”
The 5-year holiday on business rates for new fibre optic (FTTP) broadband ISP infrastructure, which has also been adopted by Wales, is currently due to expire at the end of March 2022. This covers new fibre that has been “laid, flown, blown, affixed or attached” since 1st April 2017, including any plant and machinery intended to be used in connection with that fibre.
The rates relief was introduced alongside various other schemes (e.g. broadband vouchers), regulatory changes and investment programmes, which together formed a key part of what has since helped to drive more competition into the UK fibre market. As a result, a mass of AltNets are now investing to help deploy gigabit-capable broadband alongside the big boys (Summary of UK Full Fibre Progress).
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Admittedly, the change had less of an impact on existing operators, such as Openreach (BT) and Virgin Media, because it was introduced alongside a “revaluation” of business rates for existing infrastructure, which at the same time hit them with a huge tax hike (here). Nevertheless, the holiday has played a part in helping to support the business case for greater investment in new fibre.
However, the UK government has so far shown no indication that it will extend the current relief, which is despite Scotland’s decision in 2019 to introduce a similar relief that will last for 10-years until 31st March 2029 (this may even be extended). Furthermore, a lot of fibre builders will continue rolling out after 2025 and many don’t expect to see payback on their investment for around 15 years, thus a longer period of relief would help.
One problem on this front is that the Valuation Office Agency (VOA), which sets the business rates, isn’t expected to run another revaluation exercise until 2023 and thus the boat of opportunity for another extension in England, as well as Wales, may have already been missed for this year.
A Government Spokesperson told ISPreview.co.uk:
“We are committed to meeting our fibre rollout target of at least 85% of UK premises having access to gigabit-capable broadband by 2025, which is why we’re investing £5 billion so hard-to-reach areas can access gigabit speeds, whilst firms can still benefit from the super-deduction, the biggest business tax cut in modern British history, as well as, from next year, a new business rates improvement relief.”
We should point out that the Government’s “super deduction“, which gives a big tax break to businesses that invest in new plant and machinery assets, is also due to expire next year. But admittedly, that will be offset in later years by the subsequent increase in the corporation tax rate to 25% from April 2023. Still, this is something else that could be extended, although it probably won’t be.
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The Government noted that they keep all taxes under review, but do not generally comment on speculation around tax policy outside of fiscal events.
Openreach spokesperson said:
“The business rates system adds significant cost and uncertainty to the investment case for full fibre, with the next revaluation coming in 2023. The Government’s tax super deduction has had a very positive impact in bringing forward fibre investment, but also expires next year.
The industry therefore needs more predictability and transparency over the long term to boost investment and help deliver the Government’s broadband commitments.”
A Virgin Media (VMO2) spokesperson said:
“We’re on a mission to upgrade the UK and believe that the Government should be ensuring the right environment exists to support privately funded network expansion and upgrade programmes which are bringing gigabit broadband and 5G services to even more homes and businesses across the country.”
In fairness, the rates relief, while desirable, hasn’t stopped operators from preparing huge new fibre builds and related investments that will continue well beyond this year. Part of that may be because, in terms of the extra cost per home passed (just a few additional pounds per annum), the fibre tax doesn’t add very much. But such figures do add up as new networks pass more premises, particularly for the biggest players.
At this point it’s worth highlighting that the need for an extension beyond 5 years also came up as part of the original consultation on the relief. In response, the government said that idea was “out of scope of the consultation,” but they did then amend the legislation so that the final act “allows the Government to extend the relief in future if they wish.” So the possibility does exist, even if there are no signs of it being utilised.
The good news is that, so far, no operators have publicly said they would have to scale-back their deployment plans as a result of the rates relief coming to an end. We also have to consider that the UK economy has just been ravaged by the global pandemic, among other things, which has left the Government with less financial flexibility.
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None of the other operators that we engaged with for this article are currently anticipating any positive movement on the Fibre Tax before the current relief expires, although we’d love to be proven wrong.
noooooo im about to subsidise openreach to the tune of 9 grand..
really shouldn’t read articles when im half asleep. sheepishly wish there was a remove comment button now…
So April is going to be Gas, Electricity and now Internet prices going through the roof then?
The Fibre Tax is quite far removed from the retail side of things and its impact relatively small at that scale, although I suppose that all such things do play into some consideration over costs. In any case, a lot of big ISPs have already hit consumers with a huge price rise for 2022 and that’s mostly due to inflation:
https://www.ispreview.co.uk/index.php/2022/01/big-uk-broadband-isps-can-now-confirm-huge-2022-price-hikes.html
Unfortunately Welsh Government didn’t follow suit. The paper recommending they do so (which is what you find on a Google Search) went before the Welsh Parliament but was rejected.
In Spring 2021 Welsh Government ran a consultation on whether to introduce fibre tax relief for Wales and we await the outcome.
Unfortunately Welsh Government didn’t follow suit. The paper recommending they do so (which is what you find on a Google Search) went before the Senedd but was rejected.
In Spring 2021 Welsh Government ran a consultation on whether to introduce fibre tax relief for Wales and we await the outcome.
They could re-introduce a windows tax 🙂
This is a window tax, a very small very deep window we shine a laser through
It makes more sense to subsidise the harder to reach areas. There is no point subsidising the areas where there are multiple networks fighting to overbuild each other.
That’s what Project Gigabit is for. This isn’t a zero sum game.
Using money for the UK? That’s racist…
our immigration system is far from perfect l agree and allot does need to be done, but lets be honest here.. the real problems lay elsewhere and blaming immigration is just lazy thinking.
the real issue is tax avoidance, something that most of us and definitely not immigrants can afford to do, in fact this recent budget gave a hefty tax cut yet again to high earners!! pretty much every year high earners taxes go down while ours go up, we are nothing more than a tax haven now, which begs the question… why do we have to pay more so they can pay less despite the fact that they have more than enough wealth without having to choose between heat or eat.
Do wireless and satellite ISPs pay the tax or does it only apply to landline provision?
Not £2.7 million, but £4.7 million a day to accommodate illegal migrants the government now admits. The number of cross-channel migrants this January was five times higher than in the same month last year.
Nearly £10 Billion a year……covering the English Channel with sea mines would cost far less.
> this “Fibre Tax” holiday is about to expire and there’s been no indication of an extension. Some operators fear this will add “significant cost and uncertainty to the investment case for full fibre.”
The holiday was for a fixed period, and nothing else was promised. If the operators hadn’t already factored in the “significant cost and uncertainty” of it not being extended, then they only have themselves to blame!
Totally agree, but after our 500 +/- 20% daily covid death means around 3,000 folk dying a week, and we need a quick replacement of those livestock, so it makes sense. Also mostly old carehome residents and unvaxed lot dying probably. But if you can look beyond race, and just think numbers, then it makes sense… although, we shouldn’t be handing out free money to the likes of fat-boy kim in North Korea, and india… it’s our mad Christian lot going around increasing population around the world, and than, it’s coming full circle and biting us on the backside, and nothing to show for it except more national debt.
will they put up the cost of Starlink’s spectrum licenses along the same lines?
it’s only fair there’s a level playing field.