Self-storage firm Lok'n'Store said plans unveiled in Wednesday's Budget to extend value added tax (VAT) to the use of self-storage would not affect it as it has always charged VAT on its storage services.
Nevertheless, the company's shares fell 5p to 103p in the morning session following the Budget, before recovering to 105.5p.
The situation with Lok'n'Store competitor Safestore is different, as it does not currently charge VAT on the rental of self-storage units. Nevertheless, in the wake of the 5.25p fall in the share price (to 118p) on the day of the Budget speech, the company was keen to play down the effects of the proposed change.
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Safestore noted that around a quarter of the group's revenues come from its Parisian business. Furthermore, it revealed that around 50% of the space it lets in the UK is taken by business customers who are well practiced in claiming back VAT paid out on purchases.
Despite playing down the effects of the proposed changes, the company said it would "actively engage" in discussions with Her Majesty's Revenue and Customs (HMRC) office and its advisers about them.
HMRC plans to extend VAT to cover the use of self-storage from October 1st, 2012. That gives plenty of time for Safestore to adapt its business model to account for the changes, as its customer licence agreements allow it to vary pricing with 28 days notice.
Furthermore, the group also gave the bean counters at HMRC something to think about.
"Over the past 10 years we have not been recovering VAT on our capital expenditure given that self storage is exempt. Any future implementation of this change would require the reimbursement of a significant sum to the group under the Capital Goods Scheme, the timing of which would be subject to agreement with HMRC," Safestore said.
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