Many startups that aren’t VAT registered and domestic self-storage customers will have to start paying 20% extra under changes being introduced on October 1, warns Thames Valley and South Coast accountants and business advisers James Cowper.
And it is expected that the competitiveness of small self-storage companies that do not currently charge VAT to their customers will be hit hard, as HMRC moves to address anomalies in the VAT treatment of different types of storage providers.
Ruth Corkin, head of VAT Services at James Cowper, explained: “Under current rules the rental of self-storage units is exempt from VAT, having been treated as a licence to occupy land in the same way as renting any other commercial property. From October 1, however, the rules will instead be based on the use of space for the self-storage of goods and a lot of small industrial units will be caught for the first time if they have not opted to tax in the past.”
She added: “VAT registered businesses will be able to continue to re-claim input tax through the normal channels and it is possible that not all providers will pass on the charge to customers. Those that have been charging VAT for years will no doubt be in a stronger position. One anomaly that this change in law has caused is that the term ‘self-storage’ includes warehousing. This means the new rules will catch landlords who rent a unit with a large storage area and only a small office, even though they may not view the supply to be that of ‘self-storage’.
“For those who are contemplating issuing invoices in advance of the change in law, there are new rules to ensure that any supplies invoices up front that will take place after October 1, 2012 will automatically be subject to VAT after that date.”
The decision to make self-storage no longer exempt from VAT was announced in the Budget and parts of the industry have been lobbying for a reversal.
Resources: James Cowper website