The Chancellor of the exchequer announced today as part of the Budget the removal of the VAT exemption for grants of facilities for the self storage of goods and the removal of the VAT zero rate for supplies of services and materials in connection with approved alterations of protected buildings. This will have effect from 1 October 2012. For approved alterations that are already contracted for or under way, transitional relief will be provided for supplies made before 21 March 2013.

The Government have taken this step to address inconsistencies in the treatment of these supplies and to prevent VAT avoidance that exploits the VAT exemption for supplies of self storage. To protect the public finances from artificial avoidance of the change in VAT liability, the Finance Bill 2012 will contain anti-forestalling legislation to ensure that the VAT liability changes are fully effective.

Anti-forestalling legislation will apply to these types of supplies made on or after 21 March 2012. This will ensure that the new VAT liability will apply to these supplies if they are performed (or, in the case of supplies of materials, incorporated in the building) on or after 1 October 2012, even if the supply is treated as being made earlier than this because of an advance payment or delivery of materials. The new VAT liability will also apply to grants of rights or options made on or after 21 March 2012 to receive supplies of self storage to be provided on or after 1 October 2012.

Whilst the attached anti-forestalling legislation will apply for supplies treated as taking place on or after 21 March 2012, any VAT arising from its operation will not become due until 1 October 2012. Until then, suppliers should continue to apply the current rules.

Further information on the anti-forestalling legislation is available at: www.hmrc.gov.uk.