Most self storage businesses are partly exempt for VAT purposes due to supplying insurance to their customers. For many this is not an issue because VAT incurred on the running costs is quite low. However if your business has had any capital spend in the last 10 years you may have large sums of VAT that could not be claimed due to partial exemption restrictions.
Partly exempt businesses need to calculate how much VAT they can claim on their capital and overhead costs and this is typically based on turnover values (known as the standard method). The idea is that the split between taxable and exempt income reflects the use of the business assets and overheads and is therefore a fair way to apportion the VAT on these costs. However as contents insurance generates significant turnover but actually requires very limited use of the overheads it may distort the calculation resulting in a disproportionate restriction. Where a business has acquired, built or renovated premises and incurred substantial amounts of VAT such a restriction could be significant (from experience it could be 10-20%).
Where the standard method does not provide a fair recovery of VAT it may be possible to apply for an alternative methodology to calculate how much VAT can be claimed. We have recently achieved a restriction of less than 1% for one business in the industry by taking this approach.
If your self storage business is planning to carry out a large capital spend, or has done so in the last 10 years, our VAT team can help you apply for an alternative method to achieve a fairer VAT recovery.
If you are interested in this service please contact our VAT team below.