STORAGE firms are to consider fighting plans announced in Wednesday’s Budget that would force them to start charging customers VAT.
The industry, which stores goods on behalf of people and companies and whose biggest players include Big Yellow and Safestore, is currently exempt from the tax because its services are treated like property rental.
But Chancellor George Osborne said he will consult on plans to change the rules, potentially forcing some companies to increase charges by as much as 20 per cent from October.
Alan Carter, an analyst at Investec Securities, believes the industry has a good chance of challenging the proposals, which he estimates will end up losing the Chancellor money in the medium term.
This is because changing the way these firms are classified by the taxman would allow firms to reclaim VAT they have paid in recent years on their capital expenditure.
He said Safestore alone could be set for a windfall of £17 million to £18 million. Big Yellow, which operates 65 stores mainly in the London area, and Safestore, which has 97 stores in the UK, have both said they will work with their tax advisors to discuss the proposals with HMRC.
However, Lok’nStore, which operates 22 sites, said it has always charged VAT. Mr Carter said: “The decision demonstrates a potential lack of forethought on the further consequences of the change, leaving the self-storage industry well placed in our view to mount a successful defence of the change.”