The firm behind the Channel Tunnel train will pursue legal action against a UK government agency and pull out of all its future investment in Britain unless plans to triple its business rates bill are aborted.
Eurotunnel is poised to scrap its multimillion-pound plans to revive a major freight terminal in east London and cancel an eagerly anticipated freight service direct to Lille to minimise the effect of the reforms set to add £118m to its tax bill in three years.
Boss Yann Leriche told City AM that the government’s business rates overhaul would take Eurotunnel’s tax rate on all new projects to over 75 per cent, meaning its array of planned investments in the UK would be lossmaking.
“It’s impossible to understand these increases because [business rates] are a property tax based on assets,” he said. “Our tunnels are the same, our terminals are the same, our trains are the same as three years ago.
“A tax increase with inflation or even our revenue, I would understand, but this is totally out of control.”
Ministers are planning a major shake-up of the business rates system – the equivalent of council tax for commercial properties – early next year in a bid to reduce the tax burden it places on small businesses. But the overhaul, due to come into force in April, will also cause Eurotunnel’s annual tax bill to jump from £22m to £65m, according to proposals from the Valuation Office Agency (VOA) that sets rates for central government.
Major transport hubs like Heathrow, Gatwick and Eurotunnel owner Getlink are in line for especially sharp jumps to their business rate bill, as the government has opted to target firms with the most valuable properties in order to reduce bills for smaller high street companies. Earlier this month, Heathrow and Gatwick both warned they faced “an eye-watering” 300 per cent rise to their business rates bill if current plans went ahead.
Leriche said that Eurotunnel’s property tax in the UK will be 10 times the amount it pays in France, and and issued a broadside against the VOA’s process for devising the rates branding it “unpredictable, opaque and disproportionate”.
Eurostar would be forced to stomach some of the business rates hike, Leriche said
Eurotunnel to pass on business rates hike to operators
City AM can reveal the firm is now pursuing a legal action against the government agency in a bid to secure a reevaluation of its rate, a process which even could see its tax bill brought down to zero, Leriche said. Eurotunnel is in a unique position on tax and government policy in France and the UK, due to an agreement struck in 1986 between the two countries and the channel tunnel operator Getlink.
“We have informed the Department for Transport that we are starting a legal process against the VOA, on the basis of the concession agreement,” he said, adding: “And what is a bit unfortunate is that… we want to pay a fair amount of taxes, but if in the end the judge says we should pay zero because of our specific international agreement, the [UK government would suffer] a huge loss.”
According to independent estimates, reopening the major terminal in Barking and expanding its freight operation – along with other plans to bring down barriers to entry on the passenger network – would bring over 750 new jobs and a £1bn boost to the economy.
The proposed new freight service would have transported lorries from east London all the way to Lille, north west of Paris. The move, which would have occupied the track mostly overnight, would have freed up room on other services for travellers and reduced the traffic burden around Dover and the French capital, Leriche said.
Eurotunnel’s intervention comes at a pivotal time for the rail network between France and the UK, which is in the process of opening up to multiple operators for the first time. Last month, Virgin trains was given regulatory approval to challenge Eurostar on its Channel Tunnel operations for the first time since the route’s inception in 1994. Three other operators – including the Italian state-owned Trenitalia and start-up Gemini – are also vying for approval for a service.
But the Getlink boss confirmed it would have to pass the bulk of its business rates hike onto operators, potentially jeopardising the commercial attractiveness and feasibility of new entrants.
“We pass 50 per cent of those business rates to the high-speed services, so it will be a new burden,” he said.
The VOA and Department for Transport were approached for comment.