The supply of land or an interest in land is usually treated as exempt from VAT. If VAT is to be charged, landlords and land owners are required to opt to tax the land and property. This brings income and outgoings related to the property and land within the VAT provisions.

From 1st October 2012, the VAT exemption for storage facilities was withdrawn which means that VAT is payable automatically regardless of whether an option to tax has been exercised.

The VAT Information Sheet 10/13 was published in August 2013 and is the latest guidance from HMRC on the issue. The information sheet provides that the new rules will apply to suppliers of: “any facility which is used, or could potentially be used, by their customers for the storage of goods and customers who rent facilities to store goods.”

Facilities include a container or other structure which is fully enclosed, or a unit or building for the self-storage of goods (excluding animals). Self-storage is defined as “the use of a relevant structure for storage of goods by the person (or persons) to whom the grant of facilities is made.”  This will also include the use by a person with permission of the grantee.

The main consequence for landlords is that, as the supplier of premises, they will be required to monitor the use of the premises. Where premises are exempt from VAT in the normal case (and where no VAT election has been made), VAT will automatically become chargeable where the tenant, or a third party with permission of the tenant, uses the whole or part of the premises for storage.

Clearly landlords who are not located near to the premises will often not know how the tenant is using the premises. In this case, the information sheet suggests that the landlord obtains and keeps confirmation in writing of the use from their tenant.

The rule changes mean that landlords must now ensure that they keep a closer eye on the activities of their tenants or third party occupiers so as not to contravene the VAT rules. We anticipate that additional robust wording may now be included in leases going forwards, to deal with these changes.

Catherine North is a Solicitor in the Commercial Property Department. Catherine can be contacted on 0116 281 6226 or by email at

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