Standard rated supply of storage facilities or the lease of part of a building?

The taxpayer bought the freehold of a steel building to be used as a self-storage facility. No VAT was charged by the seller on the freehold sale and the taxpayer did not opt to tax its interest in the building.

The building had mezzanine floors made out of steel frame and covered with plywood. Store pods could then be inserted on each floor to store goods. The taxpayer leased the individual pods to investors on a 999-year lease with a guaranteed return of 8%. The investors were private individuals and pension funds. They could charge third parties directly for use of the pods but most of them leased the pods back to the taxpayer which then found the customers. The investors paid a premium for the lease and it was registered with the Land Registry. The pods had to be used solely for storage.

HMRC’s view was that the...