The Liberal Democrat MP for South Lakes, Tim Farron, has given his support to rural ISP B4RN over the recent loss of their tax relief following changes to the Enterprise Investment Scheme (EIS), which he warned could “undermine the good work of broadband pioneers” in such remote UK communities.
The current situation stems from an article we wrote on Saturday (here), which revealed how the Government had decided that B4RN, as well as other Community Benefit Society (CBS) based broadband operators, were seemingly no longer eligible to benefit from any tax breaks or other support afforded by the EIS (here).
As most readers known B4RN builds Gigabit capable “full fibre” (FTTH) broadband networks in some of the most challenging rural areas. In order to do this they rely on volunteers helping to build the network (usually in exchange for shares instead of cash) and landowners (e.g. farmers) agreeing to waive their right to payment under a wayleave (access) agreement.
On top of that any money they make is reinvested back into their network and used to further improve coverage. Unfortunately HMRC now appears to have deemed their approach to be “fundamentally uncommercial” (i.e. not setup to make a profit), which is kind of the point but also locks B4RN out from the benefits of EIS tax relief and sends a similar signal to other such CBS based alternative network ISPs.
We have been trying to get a clear comment from the Government about this all week but without much luck (DCMS passed us to HM Treasury and the latter has yet to respond). Thankfully Tim Farron MP appears to be having a bit more luck and put the question directly to the Government’s Chancellor, Philip Hammond MP, during yesterday’s House of Commons debate on Deficit Reduction.
Question – Tim Farron (Westmorland and Lonsdale) (LD)
“World-class connectivity is vital to tackling the deficit, but the Treasury’s decision to stop investors in community benefit societies receiving 30% tax relief could undermine the good work of broadband pioneers such as Broadband for the Rural North—B4RN—in Cumbria.
Given that B4RN has reached the parts of Cumbria that the Government and BT could not or would not reach, what assessment has the Chancellor made of the effect of that decision, and will he think again about his damaging proposals?”
Answer – Mr Hammond
“I am not familiar with the case to which the hon. Gentleman has referred, but obviously we want to encourage the delivery of high-speed connectivity in all areas, including rural areas. If the hon. Gentleman wishes to write to me with the details, I shall be happy to look at them and respond to him.”
In the meantime some of the smallest projects might be able to seek similar support via Social Investment Tax Relief (SITR), although this is limited to a maximum investment of £1.5m (EIS caps at £12m and B4RN is already at around £6m) and a fair few full fibre projects could hit that fairly quickly (FTTP/H is anything but cheap).
One fear is that if operators of a similar size cannot access this kind of support then it may simply result in the Government eventually needing to dole out even more public funding in order to resolve a problem that, in some areas at least, the local community could have done by itself.