FARMERS who use their buildings for storage purposes are being urged to take expert financial advice to avoid falling into a new VAT trap.

New HM Revenue and Customs regulations mean that any business with a taxable turnover of more than £70,000 that charges customers for selfstorage must add VAT at 20 per cent.

Failure to do so runs the risk of incurring fines and other penalties.

The change could have a significant impact on the many rural firms who rent out storage space on their property or pay to store their equipment elsewhere.

Nigel Parsons, MD of business software specialist Landmark Systems, explained: “The new rules are complex and open to misinterpretation, which is why we are urging our clients and other rural businesses to look very carefully at their business.

“Where storage is a small part of the overall business, an owner could try and make the case that it is run separately from the rest of the company and therefore falls below the VAT threshold.

“The Revenue is unlikely to share this view, however, unless you can demonstrate clearly through your business reporting that a genuine separation exists.”

Parsons also warns of potential hidden costs within the new legislation.

“Business that do come under the new tax regime will need to consider the implications of administration costs such as updating price lists, terms and conditions and direct debit mandates,”

he said.

“For those with manual recording systems this can be a costly and time-consuming process.”

With the Treasury estimating that nearly 250,000 UK businesses and private customers use selfstorage facilities, the advice is to ensure that your software can be amended to suit the new regulations, and to contact your professional advisor if further clarification is needed.