New measures announced in the Budget may require self storage companies to charge VAT to their customers adding 20% to their bills from October 2012. As most self storage customers are not VAT registered they will be unable to reclaim the tax.
Until now self storage units have been treated in the same way as the rental of commercial property, and thus exempt from VAT. The government now wants to bring it in line with other forms of storage and is conducting a consultation. Both Big Yellow and Safestore have said that they will be discussing the matter with the tax authorities.
This is something the moving industry has been crying out for ever since self storage was introduced to the UK. The anomaly was obvious: conventional storage attracted VAT whereas self storage didn’t giving self storage companies a clear advantage over operators of conventional stores. As the moving industry adopted self storage the problem became worse: those with a split-service site didn’t know whether to charge VAT or not. Some charged it anyway, to be safe; others took the risk.
Brian Maidman from Maidmans in Bournemouth runs such a site. He has always charged VAT and said that the change will be good for his business. “Self storage companies will now have no choice but to charge the VAT and pass it on to their customers,” he said. Matt Purdie too has always charged VAT but agrees that the change will be good for him as others will be forced to put their prices up.
Gavin McCarthy from Britannia Movers International said that it would be good news if it goes through although we should expect the self storage industry to fight it all the way. “The Chancellor announced that this was a 'Budget for Business' so it's great to see steps to allow businesses to compete fairly with each other,” he said. “It's only then that we get a truly competitive market place allowing companies to operate in a more open and effective environment. Consumers will also gain as this measure will cause less confusion and more clarity across storage providers so they can base their selection on the quality of the company's service and its facility rather than purely on price.”
The Self Storage Association (SSA) would not comment on the effect on its members however did say: “This has come as a surprise to the industry. The SSA UK has begun consulting with its members and advisers to fully understand the implications of the government’s proposal to charge VAT on the use of self storage. The SSA UK, and its membership, will fully engage in the government consultation process.” Indeed it may well be this surprise element that might form the basis of an appeal by the major self storage companies.
Until a few years ago BAR lobbied hard for this change to take place through its External Affairs Committee chaired by Tony Richman and David Trenchard. “I am delighted that all our efforts to get a level playing field have at last resulted in government action,” said David. The Mover could not establish whether that lobbying has continued more recently. BAR was asked to confirm whether it had been instrumental in effecting the change but had not responded on going to press.
The matter will now go to consultation and it is inconceivable that the large self storage companies will not lobby hard to have the decision reversed. It is, therefore, vitally important that the moving industry is equally vocal. For BAR in particular not to do everything in its power to push home this long-awaited advantage would be a tragedy and an insult to all those who for so many years put in an immense amount of work to get this far.