Storage tax to backfire

BIG Yellow Group’s stock plunged four per cent on the Budget’s surprise announcement that self-storage units could from October no longer be exempt from value added tax.

In the name of correcting VAT anomalies and closing loopholes, Osborne outlined that self-storage will be taxed as other forms of storage and no longer be classed as rental of commercial property, which is VAT-free.

Investec analyst Alan Carter said that while storage company Safestore’s business would not be materially affected, the industry had strong grounds to dispute the measure as self-storage companies could be liable to a multi-million VAT rebate on accumulated capital expenditure.

He told City A.M.: “The industry was blindsided – this announcement came out of the blue.”

“The decision demonstrates a potential lack of forethought” by the government, Carter added.

Big Yellow Group said it “intends to actively engage” in the consultation process with HMRC, adding: “This change would require the reimbursement of a significant sum to the group under the Capital Goods Scheme.”

Safestore, whose share price dropped one per cent, released a similar statement. It said it would take a smaller hit than rival firms, as 25 per cent of revenues come from Paris.