UK Self-Storage Industry Considers Legal Challenge Against Treasury Plans to Charge VAT on Rental Units

Posted by MiniCo on Jul 11, 2012 12:00:00 AM

UK Self-Storage Industry Considers Legal Challenge Against Treasury Plans to Charge VAT on Rental Units

The self-storage industry is considering a legal challenge against the Treasury’s plans to charge VAT (Value Added Tax) on its rental units.

Rivals Big Yellow and Safestore have teamed up to mount a challenge to Government. The two listed firms account for 45 per cent of the UK industry.

Big Yellow chief executive James Gibson said: ‘We have taken legal advice, and there may be grounds for an appeal. We will make a final decision over the summer.’

Until now self-storage units have been treated in the same way as other rented commercial property, which is exempt from VAT. But in the Budget Chancellor George Osborne said these units would be subject to the full 20 per cent VAT charge from October.

However, Gibson said he was considering challenging this move on the basis of European Union laws, which say that such tax changes should be proportional and should not discriminate between various types of commercial landlords.

Until now self-storage units have been treated in the same way as other rented commercial property, which is exempt from VAT. But in the Budget Chancellor George Osborne said these units would be subject to the full 20 per cent VAT charge from October.

However, Gibson said he was considering challenging this move on the basis of European Union laws, which say that such tax changes should be proportional and should not discriminate between various types of commercial landlords.

The industry argues the move will knock property valuations and hit profits.

The industry cannot mount an appeal until October 1, when the new tax comes into force.

A successful challenge would be yet another blow to the Treasury’s attempts to raise revenues through VAT. Since March it has been forced into a series of U-turns over plans to levy VAT on pasties and caravans.

The government also had to drop a cap on tax relief on charitable donations.

Big Yellow (up 1.1p to 294.9p) said that when the new tax comes into force it plans to pass on half of the VAT charge to consumers and all of it to business customers.

Big Yellow added in a trading update that sales at its 54 wholly owned stores grew 10 per cent to £16.9m in the first three months of the year.

The industry argues the move will knock property valuations and hit profits.

The industry cannot mount an appeal until October 1, when the new tax comes into force.

A successful challenge would be yet another blow to the Treasury’s attempts to raise revenues through VAT. Since March it has been forced into a series of U-turns over plans to levy VAT on pasties and caravans.

The government also had to drop a cap on tax relief on charitable donations.

Big Yellow (up 1.1p to 294.9p) said that when the new tax comes into force it plans to pass on half of the VAT charge to consumers and all of it to business customers.

Big Yellow added in a trading update that sales at its 54 wholly owned stores grew 10 per cent to £16.9m in the first three months of the year.

(via This is Money)

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