Monday, December 06, 2010


Fibre Tax Fig Leaf

I'm kinda bored with reading people droning on about how the UK's taxation of business assets shouldn't include fibre optic networks (presumably electricity distribution networks are a "legitimate" target for taxation) and how this massive and inequitable tax is holding back the progress of network deployment in the UK.

Some months ago the Valuation Office Agency (VOA) and the Broadband Stakeholders Group (BSG) worked together to clarify the current regime, and to come up with valuations for Fibre to the Home (FTTH) and Fibre to the Cabinet (FTTC) networks. This was done because the networks are new and as such there isn't a database of costs, rents, receipts and expenditure or other measures of valuation that can be applied to these assets. The VOA Guidance Note came up with a figure of £20 per home connected for FTTH networks. This £20 is the rateable value, the actual business rates charged will be slightly less than £10 per year with discounds available for small companies and charity / not-for-profit entities at the discretion of local rating offices.

Those of a campaigning bent also point out the cost to operators of rates on long distance fibre networks. They are particularly exercised about this because they hate BT and BT's fibre network is assessed as a whole and not using the per km table published by the VOA. Other operators can negotiate with the VOA to use alternative methods of valuation and various tribunals and courts have so far ruled that there is no unfair discrimination against other operators such as Vtesse Networks.

I always like to put numbers on things, as it brings the issue into focus and shows if my understanding is correct. If I were to start a network company and run a pair of fibres 25km to the nearest interconnection opportunity in Peterborough the rateable value from the table is £500 per km for 2 fibres in the range 10 to 100km long. So that's an RV of 25 * 500 = £12,500 on which I would pay annual business rates (technically "National non-domestic rates") of 41.4% * £12,500 = £5175 per annum. If I use this to serve 500 customers then it's £10.35 per year per customer. If I set up a broadband charity or not-for-profit community association I may get "relief" on 80% or as much as 100% of this, or if it were my only small business I may get a reduction from "small business relief". The VOA provide worked examples (PDF download).

If my fibre were deemed to be part of a FTTH network and were my only network asset it would appear to fall under the £20/year per home connected scheme :-

(Diagram from VOA document).

So in my case y=25km and I pay £20 * 41.4p = £8.28 per home connected per year.

Clearly it would be in my interest to avoid having the 25 km run be valued separately and additional to the FTTH network, but the numbers here really aren't that scary and investment blocking, are they ?


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