VAT – Self Storage

Who is likely to be affected?
All providers of self storage, who have not already opted to tax their supplies.

General description of the measure
This measure requires all providers of self storage to charge VAT.

Policy objective
This measure levels the playing field between operators of self storage and other types of storage and addresses tax avoidance, making the VAT system simpler and fairer.

Background to the measure
Self storage providers allocate their customers with a discrete area of land and so their supply can qualify for VAT exemption.

Providers of other types of storage (such as traditional removal companies) which do not provide their customers with a discrete area and are able to move their customers’ goods around within their premises, already have to charge VAT on their rental charges.

Around 30 per cent of self storage is currently taxed because of the option to tax. Some self storage providers have never opted to tax but those that do are able to reclaim VAT on the costs of constructing or purchasing their storage facilities. Some self storage providers have used avoidance arrangements to convert their taxable supplies back to exempt supplies, gaining an unfair advantage over their competitors.

This measure was announced at Budget 2012 and a consultation document entitled VAT: Addressing Borderline Anomalies was published together with draft legislation.

Detailed proposal Operative date
The measure will have effect on supplies made on or after 1 October 2012. Anti-forestalling legislation will apply to supplies made on or after 21 March 2012.

Current law
The current law is contained in Item 1 of Group 1 of Schedule 9 to the Value Added Tax Act 1994. This exempts from VAT supplies of land subject to a list of specified exceptions.

Proposed revisions
Secondary legislation will amend Item 1 so that the supply of self storage is added to the list of exceptions meaning it can no longer be exempt from VAT.

Anti-forestalling legislation will be introduced in Finance Bill 2012 to prevent businesses entering into avoidance arrangements from 21 March 2012 in order to obtain exemption for self storage supplied from 1 October.

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