Check VAT rules on farm buildings let for storage

Farmers letting out buildings for storage need to establish how these are being used so they do not fall foul of VAT rules.

Standard-rate VAT of 20% has been chargeable on the letting of buildings with no open sides for storing goods since 1 October 2012.

A farmer letting a barn becomes a supplier and must charge and account for standard rate VAT. Exceptions include housing livestock, letting to a charity for a non-business purpose and freehold sales.

At accountants Smith & Williamson, associate director Brigitte Potts said that in meetings with land agents in November there was still a lack of awareness about the new rules, even after HMRC issued a reminder in the autumn.

“Landlords have to find out whether the building is used for storage,” she said. “If it is then they should be charging VAT and if they have not they should remedy the position.

“Strictly speaking they should go back to 1 October 2012 and if they cannot get the VAT from their tenant then HMRC will treat their income as VAT-inclusive.”

Mrs Potts said it was up to the supplier of the building to ensure it was taxed correctly.

“It would therefore be sensible to include a clause in new leases that the tenant has to notify the landlord if he starts using a facility for storage or permits someone else to do so.”

(More on VAT charged on buildings let for storage)