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Vtesse lose court appeal over unfair fibre tax
Tuesday 16 February 2010 13:40:27 by John Hunt

ISP Vtesse Networks has lost its case at the Court of Appeal over unfair fibre taxes issued by the Valuation Office Agency (VOA) when compared with taxes issued to BT. The row exists due to the way the VOA evaluates how much companies should pay in taxes for fibre optic cable that is put in the ground. The standard method used for most companies involves paying a 45.6% tax when the fibre is lit and is based on the hypothetical rent which could be achieved from renting out the fibre. The value of this uses the length of the fibre as a basis for the cost.

BT however face different rules. They are not taxed per kilometre but based on the overall rentable value that the VOA deems is available for their network, and this is averaged over 5 years. This came in at £533m in 2006, but has decreased year on year with a value this year expected to be £255m. Based on the distance rules alone which other operators face, BT would be due to pay over £1bn. (More details on how these are worked out can be found in this computerweekly article.)

Vtesse also object to an 11% premium to operators who run short networks, and higher costs that are imposed for the first fibre that is lit on a specific route. They believe that these taxes which are only charged in the UK and Ireland are putting operators off entering the market, and leaving it within the hands of BT to deploy next generation access (NGA).

"We believe it's fundamentally discriminatory for one company to be taxed at this massively higher rate. Unless a fairer means of taxing such companies emerges, there's going to be a diminution of enthusiasm among potential entrants to the market."

Tony Ballard, (partner) Harbottle & Lewis, law firm representing Vtesse

Vtesse plan to take the dispute to the Supreme Court.

Comments

Posted by searcher100 over 5 years ago
So what happened to the level playing field?
Posted by mikeblogs over 5 years ago
I never understood why they tried to prove the BT deal was unfair, when it is probably related to reducing share due to LLU, why not register to acquire the status of one of the other network providers who also have network deals.
I would question Vtesse legal approach. Sure the notion is daft, but other smaller providers have different evaluation methods.

This very disappointing Vtesse do great work
Posted by CARPETBURN over 5 years ago
Wow yet another example of a company being punished and examples of how smaller companies are puinished while BT are subjected to different rules to save them money.
Good luck to Vtesse i say take it all the way you can and if you still dont win then file for bankruptcy and stick 2 fingers up to them still.
Posted by yobrenoops over 5 years ago
Carpetburn, have BT ever done anything to you personally? You seem very wound up.
Posted by AndrueC over 5 years ago
I still think CB is a BT shareholder. It's the only reason I can think of for his hatred of them :D
Posted by otester over 5 years ago
Government supporting another monopoly...

How suprising...
Posted by cyberdoyle over 5 years ago
The VOA are dinosaurs holding back innovation and supporting the copper cabal. Companies like Vtesse should be applauded and supported in their endeavours to bring NGA to the people. This is another nail in the coffin of digitalbritain. It is gonna be another few generations on copper slowlane at this rate.
Posted by themanstan over 5 years ago
The real issue here is not that BT and VM get favourable tax breaks, but that there should be no tax on fibre at all... like europe, no tax equals very nice fibre networks!
Posted by cyberdoyle over 5 years ago
My fibre is a direct link on private property to neighbours, I think VOA have better things to do than bother about my paltry kilometre. LOL. I am not worth the battle.
Posted by themanstan over 5 years ago
The fibre tax is a version of corporation tax, so your private fibre will not require you to bend over for the taxman.
Posted by GMAN99 over 5 years ago
In terms of the article yes it should be the same tax rate for all or none at all, especially if its stopping smaller telco's deploying.
Posted by themanstan over 5 years ago
And my statement was to clarify for those not in the know why Cyberdoyle (and any other private individuals/groups/villages, not for profit orgs etc...) is exempt from the tax.
Posted by searcher100 over 5 years ago
What ever happened to the comments on the subject? And why this vitriol when ever someone has a view that doesn't coincide with someone else. Please grow up children and discuss the facts like adults debating.
Posted by seb (Favicon staff member) over 5 years ago
I have removed a number of comments from various users. This is *not* a chat room or forum for endless debate but a comment section. I would hate to have to restrict comments artificially to one per user, but we won't let some users destroy this for everyone.

You shouldn't really need to quote what someone else says--If the conversation is that complex, it shouldn't be taking place here.
Posted by CARPETBURN over 5 years ago
Why have 2 personal comments made to me been left (One thinking i would ever own BT shares and another that wants to make personal remarks about what they think is my emotional state).
Wow threats on my life last week and now accusations i own BT shares and am wound up being allowed. I spose its ok if you are a BT supporter and all because i dared comment with my opinion on the story concerned... wow!
Posted by searcher100 over 5 years ago
Well said seb.............
Posted by GMAN99 over 5 years ago
So with regards to the tax, does it get a mention in the Digital Britain report? In terms of - lets reduce it for X years to kick start the high speed roll out. Or is it quietly ignored because its a tax and a good and big one for the government
Posted by kamelion over 5 years ago
Tax on fibre is ridiculous, particularly when the government wants to encourage faster connectivity. It should be scrapped altogether.
Posted by GMAN99 over 5 years ago
Like I said on my other post which got deleted, surely the gov are taxing multiple times on fibre. Once via VOA and then when that fibre is used as part of a product (e.g IPClear) the gov get taxes on the product your selling yet again? Is there a similar tax for other utilities like gas/electric/water when they put their network in (pipes/cabling)?
Posted by mikeblogs over 5 years ago
652km of fibre (pairs) (90% rented dark fibre) creates an annual rates bill of £470k, £720 a kilometre, 72p a metre.

An Ofcom report 08 referred to but not relied upon in court showed operational costs per metre of fiber to be 26p a year.

The tone of list valuation looks to be based on inflated business rentals for private circuits as opposed to generic bit transport. Must work out what a 'fair' number might look like!
Posted by chrysalis over 5 years ago
I hope this stops people saying other isp's are welcome to deploy fibre instead of BT, clearly the cost for BT and others is different. I also agree with other posts that there should be no tax on fibre deployment.
Posted by kamelion over 5 years ago
It makes sense to scrap the tax if that is what is holding deployment back. I remember when fibre was first show-cased on tomorrows world, bit ridiculous that we aren't all using it all these years later.
Posted by mikeblogs over 5 years ago
European Court found Vtesse activity could not be compared with BT running a national network, so found no anti-competitive effect.
VOA had 25/27 other cases where the tone of lists for Fibre had been applied consistently for companies like Vtesse. I assuming the Tone was established for business rentals on private circuits type rentals, so it's tricky, very different to connecting consumers where a different tone may to be developed, ie £7.50 per premised passed for Cable
Posted by GMAN99 over 5 years ago
@chrysalis but that is not the fault of BT, they don't set the tax rates. Others are welcome to deploy fibre and if tax is the stumbling block more of them should take it up with the VOA
Posted by chrysalis over 5 years ago
gman99 I didnt say it was.
Posted by herdwick over 5 years ago
a community network trading as a legal entity would be liable for non-domestic rates on its properties including fibre networks and wireless masts. There are (negotiable) exemptions or reductions for charities, not for profits, rural relief etc etc.
Posted by Mr_Fluffy over 5 years ago
What precisely is the lit fibre tax supposed to be paying for? Presumably yer ackchule IT litrut Guvmint is looking for payment for some cost that wouldn't otherwise be funded - what the hell could it be that is affected by the transmission of data but not the amount transmitted?
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