Big Yellow self storage may take legal action over government VAT increase

Big Yellow has announced it may challenge the government’s plan to impose VAT on self storage from October, in order to avoid having to increase its customers’ rents by up to 20%.

VAT on self storage

Big Yellow has apparently received legal advice to the effect that the imposition of VAT can be challenged under EU laws, which state that this kind of tax increase must be proportionate and can’t discriminate against particular commercial landlords.

Big Yellow had previously announced that once the 20% VAT levy becomes operational, from 1 October, domestic customers would have to be charged a minimum of 10% extra, with the company potentially absorbing some of the rest. Commercial customers would be charged the full amount, although most of them would be unaffected because VAT-registered businesses can claim back any VAT charged on the goods and services they purchase.

Safestore Self Storage, Big Yellow’s biggest competitor in the UK self storage market, has also previously mentioned the possibility of making a legal challenge to the government’s plans.

Big Yellow may be able to draw some encouragement from the fact that several other changes to the rules surrounding VAT which the government announced in this year’s budget have already had to be modified or rescinded, including the notorious “pasty tax” on hot baked goods, as well as the initiative to place a cap on tax relief for charitable donations.

Storage.co.uk has previously launched a campaign against the levying of VAT on self storage, arguing that it will harm investment in the industry and make it harder for ordinary people to use self storage.

To read more about this you can visit the campaign’s webpage, where you can also download a website badge to show your support: “Don’t Over Tax Self Storage”

Big Yellow Self Storage

Big Yellow Self Storage made this announcement on the back of a series of strong trading results, which showed the company to be in rude financial health ahead of the VAT levy coming into force.

In the second quarter of 2012, total revenues from the 54 stores run by Big Yellow outright had risen 10% compared to the same period last year, to £16.9 million, while the 12 stores it owns in partnership with Pramerica Real Estate Investors had performed even better, with revenues increasing by 36% year-on-year, to reach £1.9 million.

Big Yellow Self Storage also made £4.75 million from the sale of land in Chiswick during this period, while it is about to close a deal to sell £7.4 million worth of land in Richmond. This land had originally been acquired for the development of new stores, but following the credit crunch, the company decided to slow the pace of its expansion while it waits for market conditions to improve.