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Property  •  VAT

Landlords take note – should you charge VAT for the provision of storage services?

By Simon Paterson on 29 June 2021

VAT legislation originally introduced in 2012 is starting to have an impact on the relevant business service providers now, as HMRC has begun issuing assessments in this area. The legislation relates to the provision of storage services and the need to add VAT to the cost of space utilised for the purpose of storage. It is a grey area and very complex aspect of VAT compliance - both companies and individuals frequently fail to appreciate how the legislation would impact them.

This 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%. As well as storage service providers for whom the addition is more obvious, it is becoming an issue for residential and commercial property owners now.  Many simply hadn’t realised how far reaching the change could be and that they too need to comply. This article explains everything.

Understanding the scope of this legislation

In this context, ‘used for storage’ means the goods are 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 us via

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