In the United States there are plenty of jokes that make the rounds every April in reference to paying taxes. Folks do not necessarily like to do it, but the law is the law—it has to be done whether you’re an individual or business. Tax issues are not germane to the U.S. though. Folks in the UK have issues with taxes just as much as in the United States— just ask the self storage industry there.
Back in October of 2012 the self storage industry in the United Kingdom lost its struggle with the government and was forced to start charging a VAT, or value added tax, to its customers. It wasn’t just a small tax they were going to have to start tacking on either, but a 20 percent increase.
Increasing a person’s bill by that high of a percentage all at once would have been a bit of a shock to tenants to say the least. Rather than do that to people, a good portion of self storage facilities decided to ease the pain by working in the increase throughout the year.
While that has affected the net rent which facilities are collecting the decrease has been relatively small (five percent). Occupancy rates have been minimal as well falling just two percent to 68 percent over the year.
“The VAT rise affected most of our operators and made self storage a more expensive product for the customer…The effect of the VAT increase has yet to be fully measured, but with average occupancy only falling two per cent over the year, members are confident of reversing this over the coming year,” said Rodney Walker, CEO of Self Storage Association UK.
Not every company was hit hard by the new taxes. Some—like Lok’n Store—actually experienced an increase in revenue. During the first half of the fiscal year it helped that they have already been charging their tenants a value added tax.
“The harmonization of VAT across the U.K. self-storage sector has benefited Lok’nStore with our major competitors having to register for VAT, while our own business was already VAT-compliant,” said Andrew Jacobs, CEO of Lok’n Store.
It is also important to note that their increase in revenue can be tied into an increase in occupancy by 12.4 percent rather than a decrease like they experienced the year before in the same period.
“The self storage industry remains resilient despite VAT increase.” PropertyMagazine International; 23 May 2013.
“VAT Not Hurting UK Self Storage Company.” Self Storage Industry News; 20 February 2013.