A budget proposal made this week by British Finance Minister George Osborne would eliminate the United Kingdoms self-storage market exemption from charging customers sales tax. The move could mean thinner profit margins for U.K. self-storage operators and higher prices for rental customers. Currently, self-storage unit rentals are treated the same as renting commercial property.
The proposal is still subject to discussion between self-storage operators and the British office for revenue and customs. If made into law, the addition of a value-added tax (VAT) could go into effect Oct. 1.
This proposed legislative change would have an industry-wide impact in the U.K., officials for Safestore Holdings PLC said in a released statement.
However, the impact on storage customers could be minimized somewhat due to the high occupancy of storage units by businesses. In the U.K., around 50 percent of our let space is taken by business customers and we would expect the impact to be limited in this sector as many businesses will simply reclaim the VAT, Safestore officials said.
Safestore owns 97 self-storage facilities and manages another 12 in the U.K. market.
Similarly, Big Yellow Group PLC, which operates 65 stores in the U.K., said the impact will be absorbed largely by business customers. Approximately 30 percent of our revenue is derived from business customers for whom this change will be neutral, as the vast majority of them are able to recover VAT, company officials said in a release.
Both Safestore and Big Yellow said their rental agreements allow them to make changes to rent amounts with 28 days notice.
Another big player in the market, LoknStore, said it would not be affected by the proposal because it already charges customers a VAT, Reuters reported.
Stock prices for all three self-storage operators fell as a result of the budget proposal.