Before 1 October 2012 if a specific area of land (land includes buildings) was let under a lease or some types of licence the supply was exempt from VAT, unless the land was subject to an option to tax. The government perceived an anomaly in the VAT status of supplies by self-storage businesses, where the customer is supplied with a specific area to store their own goods, and the supplies by warehousing and storage businesses, where the customer’s goods are stored on the supplier’s premises but are under the control of the warehouse owner. The former were exempt from VAT, unless the facilities were subject to an option to tax, and the latter was standard rated.
On 1 October 2012, the supply of land for the self-storage of goods became standard-rated.
Some supplies of self-storage remain exempt, for example, supplies to charities and certain supplies between connected persons.
Anti-forestalling provisions also apply that ensure that VAT is applied even if the supplies were invoiced or paid for before 1 October 2012.
The changes do not just affect the specialist self-storage businesses – they affect any landlord who lets land or buildings that can be used for storage.
What you need to do
If you let any type of facility that can be used to store goods you should check to see what your tenants are using the property for. If they are mainly using the premises for storing goods, either their own goods or storing goods for other people, you may have to add VAT to the rents. If this is the case you should check the terms of the lease to see if you are able to add the VAT, rather than account for it out of the existing rent.
Leases and licences should be amended so that tenants are obliged to notify you if they change the way they use the premises.
In future leases or licences, you must be sure that there is a written agreement with the tenants if they intend to use the premises for self-storage, including a requirement that they must notify you if they change the way they use the property.
See HMRC VAT Information Sheet 14/12 for details of when and how the new VAT charges take effect. This can be found on the HMRC website: