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VAT and Self-Storage

7 November 2013

HMRC have recently clarified the VAT position for storage of goods. The (very!) general rule when leasing a property is that VAT is only payable on the rent if the Landlord has “opted to tax”. However, where a leasehold property is being used for storage, in most cases VAT is automatically due, regardless of whether the landlord has opted to tax, and provided that the landlord is VAT registered and issues a valid VAT invoice in the usual way.

As the rule referred to “self storage” when the change in law took effect in October 2012, it was widely regarded as just applying to self-storage units. However, HMRC has recently clarified that in their view there is no difference between storage and self storage of goods, in this VAT context.

This will not apply where storage is ancillary to another use, for example a store room at the rear of a retail unit.

This clarificiation could be important both for tenants, who could suddenly face a large retrospective VAT bill from their landlords, and also for landlords who may have to account to HMRC for VAT they have not recovered from their tenants, in each case for periods since 1 October 2012. Landlords should also be aware that the obligation to charge VAT arises where the property is actually used for storage, regardless of what the lease may say about the permitted use.

As always with any tax legislation, the above summary is in general terms, and there are a number of exceptions – please do contact us or your accountants if you need further advice.

Browne Jacobson’s Transport and Logistics team regularly advises on all aspects of distribution and warehousing arrangements from operators licences, outsourcing agreements (including specialist e-commerce advice), conditions of carriage, claims handling (including public inquiries), and warehousing agreements to name but a few!

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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