Broadband homes face £20 tax

Non-BT networks will have to pay a £20 tax for every home they connect to a fibre-based next-generation network, according to proposals from the Valuation Office Agency.

Non-BT networks will have to pay a £20 tax for every home they connect to a fibre-based next-generation network, according to proposals from the Valuation Office Agency (VOA).

This proposal could earn the government some £205m a year. This would be in addition to what it presently earns from business taxes on BT, Virgin Media, Global Crossing and other network operators that specialise in business networks.

The proposal is buried in an appendix to a guide for industry regarding next-generation access networks.

Communications Managers Association spokesman David Harrington said the £20 rate is almost three times the original proposal, discussed in April 2009, to set the rate at £7.50 per home passed, the same rate paid by Virgin Media for its cable TV-based network.

The VOA said it had determined that it would be more appropriate to use homes connected as the basis for the charge, given the nature of the investment and longevity of payback, because it was “more scalable”.

“Scaling up the CATV scheme of £7.50 RV (rateable value) per home passed, with a service take-up at 38%, the equivalent RV per home connected is proposed at £20,” it said.

“This is the RV that the VOA initially proposes to use for all fibre-based next generation access networks on the 2010 list, (other than BT which will be a receipts- and expenditure-based valuation), pending the availability of other evidence.”

The news comes together with a re-rating of the so-called fibre tax, which the Internet Service Providers Association (Ispa) believes could increase the tax paid by small ISPs 10-fold.

Ispa council member James Blessing said the change in rating meant that instead of being rated at £200/km, a small network operator would now be rated at £2,000 for the first lit kilometre.

He said it appeared that Virgin Media would be unaffected. “But Virgin Media is advertising itself as a fibre-based network,” he said. “It is not clear if the £20 charge, rather than the present £7.50 charge will apply to it if it continues its claim.”

Blessing said the charges appeared to apply to both fibre to the cabinet (FTTC) and fibre to the premises or home (FTTP/H) connections, even if the final link was a copper pair or wireless.

“At present a 3km link from the exchange to the cabinet is rated at £600 for a small network,” Blessing said. “This will disappear in place of a £20/home charge, so breakeven is 30 houses. Most firms can justify a street cabinet only with more than 50 homes.”

Vtesse CEO Aidan Paul said this step was “highly regrettable”. “There is no distinction made between the first and second thirds and the Final Third, despite the different economics applying to them. Yet again a different and regressive regime is applied to new entrants, whilst BT is not taxed at the margin at all,” he said.

BT’s investment in fibre had halved its rateable value since 2006, but the VOA proposed to charge other communications providers for investing in what this government described as crucial to UK economic growth when it was in opposition, he said.

A BT spokesman added that the VOA proposals have yet to be confirmed.

"The implications that BT is not taxed at the margin and that it will not be paying rates on its NGA investment are both wrong. BT will of course pay rates on its NGA investment - though the amount is not yet known. The 'taxation at the margin' point has already been rejected by the European Commission," he said. 
"It is also abundantly clear from the VOA's recently published guidance that the £20 rateable value per home connected is not set in stone. The VOA is open to alternative suggestions that operators may wish to submit."

Click here to read more detail on the VOA's proposals.

Read more on Networking hardware