Is Digital Britain to be taxed back to the copper age?
Friday 30 October 2009 09:43:20 by Andrew Ferguson

Computer Weekly has spent some time looking into the business rates that affect fibre networks, and has also uncovered plans that could see Wi-Fi hotspots and WiMAX networks having to pay tax backdated to 2005. BT Retail with some 600,000 home routers capable of acting as a hot-spot could face a bill of £29m a year.

Business rates on fibre networks are well known about in the industry, but the affect that these have had on the roll-out of unbundled networks and next generation access are considerable. The tax is charged at 48.5p in the pound, with the value being based on what the HM Revenue and Customs' Valuation Office Agency (VOA) estimates as the operating profit that the network owner could make if the fibre was rented to a third party and the length of the fibre is also taken into account. This means that even if you were in a situation where you had someone willing to put fibre in the ground for free, they would have to pay the tax, based on what the potential profit might be. These estimates could vary greatly and stand as a massive barrier to firms wanting to offer a fibre based service to businesses and homes. The UK and Ireland are the only two countries in the EU to have this tax.

Much more worrying is that the VOA is suggesting a next generation access tax on homes connected to new fibre networks (remember the fibre is already subject to business rates) at around £7.50 a year. What is defined as next generation access is unclear. If Openreach FTTC (fibre-to-the-cabinet) is subject to the tax, then the millions of existing Virgin Media fibre/coax hybrid solutions should also be subject to it. Though Computer Weekly does suggest it will only relate to FTTH (fibre-to-the-home) installs, but we all know how taxes can expand.

The proposals for Wi-Fi hotspots and WiMAX networks will see them rated at £100 a year, and seems to cover any network to which public access is offered. Add this £100 a year cost to the dangers of offering people free Wi-Fi access and the number of hotels/guest houses offering free Wi-Fi is going to drop. The backdating to 2005 would be the killer, while a firm like BT would be able to survive this, how many community based networks have £500 sitting spare in the bank.

Apparently Telecommunications have been subject to non-domestic rates for many years, and these new rates are nothing new, but it seems odd that they should start to surface at a time when the need to raise taxes to reduce the UK deficit is high on the agenda.

Of course the VOA is doing what it is meant to do and is raising taxes based on the rules given to it by government, the question is whether the Digital Economy Bill due to be announced in the Queens speech will have some joined up thinking in it. Now is the time to contact your MP to find out what their position is on these matters and express any concerns you have, you can find out who this is at WriteToThem.com.