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Should you be charging VAT for the provision of storage services?

By Simon Paterson on 15 May, 2015

VAT is a notoriously complex aspect of tax compliance and companies frequently fail to appreciate how new legislation might impact them. This is proving to be especially true of VAT legislation introduced in 2012, whereby space utilised for the purpose of storage became subject to VAT in its own right, without the option to tax.

Although these rules came into effect three years ago, this is becoming an issue for property owners now because many simply haven’t realised how far reaching this change could be and that they too needed to comply.

The legislation effectively states that anyone supplying space that is used, or could potentially be used, by a tenant or customer for the storage of goods, must charge VAT at 20%.

In this context, used for storage means goods being physically stored in a relevant structure, regardless of whether the space provided was originally intended or procured as a storage space. Equally, a supply of storage may occur because the provision is implicit in the nature of the premises or commercial documentation that the facility is intended for use as storage, even if it is not actually being used for storage purposes. If the supply is of a facility that is clearly for storage purposes, it will be covered by the new VAT rules even while it is empty.


Landlords with unopted commercial property

For the purpose of this legislation, the option to tax goes with the person’s interest in the property and does not stick with the physical bricks and mortar of the property – landlords with unopted commercial property therefore need to be aware of their potential obligations to charge VAT. For example, you may have a customer that rents your unopted warehouse unit from you in which to store goods - the supply of this property will be subject to VAT.

It may well be the tenant’s primary purpose of renting the property that governs the VAT treatment of your unopted commercial property and this needs to be considered carefully if you are to apply the correct VAT treatment.


Landlords of residential properties

Residential landlords can also be caught by this legislation unwittingly, because the law states “the grant of facilities for the self storage of goods” is standard-rated. Self-storage is defined as meaning “the use of the relevant structure for the storage of goods by the person(s) to whom the grant of facilities is made (‘goods’ does not include live animals)”. Given this definition, it is entirely possible residential property could be caught in this too.


What action should be taken?

HMRC recommend that landlords should undertake periodic reviews to establish just how their tenants are physically using the rented space and that it is the landlord’s responsibility to get the VAT treatment correct, you may want to consider reviewing this area before it is too late.

Depending on your circumstances, it may be necessary to discuss changing existing lease agreements and of course any future leases too. Additionally, if you haven’t already done so, existing tenants will need to be notified by letter of these changes and any extra charges they may face.

Given this is a complex area, if you think this may apply to you, please contact us to clarify your position. It is important to seek professional advice before contacting HMRC and discussing the potential requirement to charge VAT for storage services.

For more information on VAT compliance services please contact Simon Paterson by emailing


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31 December 2020 - Review disposals of chargeable assets to avoid a possible CGT increase

Capital gains tax is due to be reviewed by the government and if a CGT rise is announced, the new rates may become effective from the next tax year on 6 April 2021. Take advice now if you are thinking of selling property or have other assets giving rise to a capital gains tax liability.