HMRC slammed over tax probe into Newcastle datacentre campus investors

Pursuit of investors

The statement also calls on HMRC to halt its pursuit of investors, as it actions may put off others from investing in similar regeneration-focused schemes.

“Unless this decision is reversed, there will be no confidence in any future government policy to incentivise investment in regeneration, job creation or research and development,” the statement said.

“This is because the move suggests the government will simply seize back any tax incentives a few years after allowing them, or just not honour them in the first place.”

Computer Weekly contacted HMRC to comment on this story, and a spokesperson said the department was committed to clamping down on any “abuse” of the tax system.

“We don’t talk about identifiable schemes,” the spokesperson said. “The Enterprise Zone allowance was designed to provide support to economically deprived areas of the UK. HMRC will not tolerate any abuse. When we find evidence of abuse, we crack down to make sure the relief works as Parliament intended.”    

Empty datacentre space

Since the Cobalt datacentre campus was built, the sites have remained unoccupied, which was raised as a matter of concern in 2013 by the head of the Public Accounts Committee, Margaret Hodge.

At the time, Hodge said the fact that the sites had been empty for two years – at that point – would fuel the perception that the scheme was aimed at tax avoidance.

“It is deeply depressing to find greedy individuals exploiting a perfectly proper government objective, to line their pockets,” she said in an article by the Guardian in June 2013. “Enterprise zones aimed to create jobs, not to enable rich people to get more money back in tax than they invested.”

According to Harcourt, the site is about to welcome its first occupants later this month, on the back of a separate investment in a 40km metro fibre network in Newcastle.  

“The multi-duct network is the first of its kind to be built in the city and connects the campus to multiple long-haul and international carriers, ensuring that clients in the datacentres have low-latency, high-capacity connectivity to London, Europe and the US,” the Harcourt statement said.

The fibre network is owned by Stellium Datacentres, a company set up in February 2016, which now oversees the management of the Cobalt datacentres after acquiring its principal assets. Its CEO is datacentre industry veteran Noel Meaney.

In a statement to Computer Weekly, Stellium stressed that it was not involved in HMRC’s investigation, and was unable to comment on the reasons why the facilities had lain dormant for so long before it acquired them.

“The team made the decision to create Stellium after being impressed with the existing buildings, the surrounding business park and the thriving digital economy in the North East,” the statement said. “They are looking forward to applying their experience and track record to make a success of this brand-new venture.

“As Stellium was not involved with the site prior to its acquisition, it cannot comment on the sales approach, capability or ability of the previous owners.”

Struggle to find clients

Speaking to Computer Weekly, Steve Wallage, managing director of datacentre-focused analyst house Broadgroup Consulting, said it was not unusual for datacentre campuses outside of the M25 to struggle to find new clients.

But there are some exceptions to this, and the improved network connectivity to the Cobalt site is a step in the right direction.

“We have seen success stories, such as NGD in Newport, and much depends on the specific location, business model and management team,” said Wallage.

“The Newcastle site has struggled in the past, despite high sales efforts by one of the big property agents, but it is much better positioned now with the involvement of Noel Meaney and investment in local telecoms.”