The new rules for VAT on the storage on goods came into force on 1 October 2012 but there does seem to be plenty of evidence that it is not properly understood.
From that date the provision of space for storage is a standard rated supply for VAT purposes. This can lead to problems where a landlord rents out space to a tenant for business occupation (often VAT exempt) who then, without the landlords knowledge, starts to use it for storage. How is the landlord supposed to know?
This is what HMRC say in their guidance:
It is the responsibility of the supplier to ensure that the correct VAT treatment is applied according to the actual use of the space. If you lease or let any space which could be used for storage and you have not opted to tax it, you will need to establish if your customer is using it for storage or permitting a third party to use it for storage and ensure you charge VAT accordingly. In most cases, the use of the space will be clear from the nature of the facilities and the agreements you have entered into with your customer. However, in some instances, facilities may be suitable for a variety of uses. In such cases, suppliers are advised to obtain confirmation from the customer of how the customer is using the space, in writing where possible, and to retain it with their VAT records.
In addition to periodic reviews, businesses letting out property and space may wish to insert clauses in leases specifying that the customer must tell them if they either start or stop using the facilities for storage, or permit a third party to do so and include provisions as to the VAT consequences.
Clearly their view is that it is the responsibility of the landlord to take all steps possible to ensure the correct treatment is adopted. Businesses can expect penalties to be applied where the guidance is not followed and VAT is found to be due.