Chartered Accountants and Professional Business Advisers

Changes to the VAT Liability of Self Storage


The VAT legislation relating to land and property is quite complex and has become increasingly so over the last 20 years.  Exemption is the base position but that can be overridden in a number of ways with the main exception to exemption being the Option To Tax that can apply to commercial property.

However, the story does not end there because there is a fairly lengthy list of items that are always subject to VAT even if no Option To Tax is in place such as facilities for parking vehicles, fishing rights, hotel accommodation, attendance at sporting events and so on.

Budget 2012 has added to this list and now requires VAT to apply to 'self storage'.

Effect of New Law

On the face of it this change to the law would appear to apply only to dedicated self storage facilities but the new law has been drafted in such a way that it will catch any facility that allows 'self storage of goods'.  This is the case even if that is not the specified purpose of the facility.  So a tenant that changes the use of a building from office space to storage of goods, for example, will create a requirement for VAT to be charged.

It follows, therefore, that landlords of properties not subject to an Option To Tax risk being caught out by this new legislation if the tenant uses the premises for storage of goods.


As is normal for VAT legislation there are exceptions to the exceptions:

Storage of goods does not include live animals.  So premises, such as stables, let for the purpose of housing animals will remain exempt unless the Option To Tax has been exercised.
Premises let to a charity for use for a non-business purpose will also remain exempt.
If the storage of the goods is ancillary to the main use of the building VAT will not apply unless the Option To Tax has been exercised.  So a tenant that leases a building primarily as office space will not trigger a VAT charge if some of the space is also used to store goods.
The anti-avoidance provisions that remove the Option To Tax where premises are let for exempt use between connected parties will also apply to premises let for the storage of goods.

Action To Take

Landlords of properties not subject to an Option To Tax should consider making amendments to all current and future leases to require the tenant to:

Notify the landlord of any use of the property for the storage of goods; and
Pay VAT in addition to the rent if it becomes applicable as a result of the new law.

Tenants not currently paying VAT for storage of goods should bear in mind the VAT charge and factor that in to cashflow projections and costings.

Further information

HM Revenue & Customs has issued this information sheet.  Alternatively please speak to your usual Shipleys contact or to the VAT team.

Specific advice should be obtained before taking action, or refraining from taking action, in relation to the above. If you would like advice or further information, please speak to your usual Shipleys contact.

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