Saffery Champness warns of VAT issues for farms and estates in relation to self storage, antiques and craft centres.
There is often confusion over some on-farm activities or services where space is made available for other commercial concerns, whether this is for storage, or for another business (for instance as a craft centre or antique outlet), and the VAT rules that apply. The recent decision of the First Tier Tribunal in the Antiques Within Ltd case helps to clarify one area to a degree.
Many farm and estate businesses make space available on their premises in return for a rent. The landlord will probably manage the building on behalf of these tenants and may even handle sales for them in their absence with the rent charged including this service. In the Antiques Within Ltd case, HMRC had argued there was a single taxable supply, whereas the landlord’s case was that the supply was exempt, being predominantly a right over land. But in this case the Tribunal agreed with neither party, finding that there were two separate supplies for VAT purposes, the service aspect being taxable but the rental of the space being exempt.
Shirley Mathieson, Partner in the Landed Estates and Rural Business Group of Chartered Accountant Saffery Champness, and based in the firm’s Inverness office comments:
This was a surprise outcome from the Tribunal and serves well to demonstrate the unpredictability of this whole area. Storage and self storage too are difficult particularly when it comes to VAT.
The area of storage presents further potential pitfalls as there is a requirement to charge VAT on income from use of a property over which an option to tax has been exercised, and VAT should be charged where goods are stored in an undefined area of a property (either opted or unopted) rather than a rental charge for use of the whole or part of the property.
However, since October 2012, VAT is also chargeable on the use of the whole or part of any facilities (whether opted or unopted) for the self-storage of goods. The distinction lies in whether the grantee is using the property for storage of their own goods (ie self storage) or those of another party.
Shirley Mathieson says:
For example if a farmer allows a third party to store furniture in a storage container on his or her land this would be VAT-able if the grantee was a furniture retailer, but not VAT-able if the grantee was a storage company using the facilities to store furniture for a third party.
VAT legislation with regard to self-storage is complex and HMRC guidance on it is open to interpretation. We recommend that professional advice should be sought where there is any doubt.