Rural business owners who rent out storage space on their land could be hit by changes to VAT from the start of next month.
The new rules mean that supplies of self storage will now be subject to the 20 per cent tax, a move that could affect many rural businesses or farms which offer their storage space out as a means of generating extra income.
Ralph Collins, a rural partner with Carter Jonas in Shrewsbury, said in the March 2012 Budget, Chancellor George Osborne announced that supplies of “discrete areas of land”, previously treated as exempt, would now be liable to VAT.
“Farmers and rural businesses in Shropshire with empty yards who have rented out space or containers to individuals with sole access to it could be affected,” said Mr Collins.
“Now all businesses that are at or above the VAT threshold of £77,000 turnover in 12 months and supply storage as part or all of their activities must levy the tax on storage customers.”
At the time the change was announced, HM Revenue and Customs thought that only around 30 per cent of self-storage businesses were registered and charging VAT.
Companies that opt to tax are able to reclaim VAT on the cost of constructing or purchasing their facility.
Mr Collins added: “Many farmers have seen this as a useful extra source of income but they cannot afford to ignore the rule change.
“HMRC estimates that an extra £15 million tax will be raised in the current year, increasing to more than £35 million by 2015-16.”
Businesses registered for VAT that rent storage may be able to reclaim the tax but it could mean a rise in costs for private individuals using storage space, for instance caravan and motor home owners.