Landlords – do you know what your tenant is using the building for?
“UK legislation effective from 1 October 2012 sought to charge VAT at the standard rate on “self-storage”. HMRC applied this to all storage, in the view of many completely incorrectly.
A new Information Sheet has now been issued on the subject (Information Sheet 10/13 – Provision of Storage Facilities). HMRC confirms where space is rented for the storage of goods by the recipient of the supply or a third party, the supply is automatically standard rated, whether or not goods are subsequently stored there. Where storage is included with other supplies, then the supply adopts the nature of the predominant element – thus a retail shop with storage would not fall within the ambit of this legislation, but a warehouse with a small office would.
Problems can arise for suppliers of buildings. Firstly those rented for storage by a landlord that thought it was making an exempt supply of land, have been liable to VAT at the standard rate since 1 October 2012. Next, a landlord must keep an eye on how a building is being used – for example, if it has been rented as a factory (and VAT not charged), but in the meantime the tenant switches use to that of storage, then the landlord is required to charge VAT on the rent. As a result, landlords should ensure that their tenancy agreements cater for the addition of VAT at some stage during the tenancy.
The Information Sheet, therefore, is a must read for any person who allows someone else to store goods in a building they own or rent, as well as any landlord who is not sure how a tenant is currently using the building.”
Thanks Steve Botham at Covertax for sharing this information.