SPACE – A Valuable Commodity

Space is a commodity that perhaps we, as farmers, take for granted. However, with many new build houses not having the same built-in storage areas available, space has become a valuable commodity within the wider community.

The provision of self-storage is a popular diversification that can generate a secure income with a reasonable return on capital. Self-storage is desirable to the public to store anything from furniture to out-of-season sports equipment, and with many new housing estates having restrictions that do not permit caravans to be stored on driveways, caravan storage is now a very desirable option as well.

If this is something that sounds appealing, then there are a few things to consider:

• Suitability

Consider if you have reasonable access to the farm that will not create risks to the rest of the business. Do you, or could you, have the available space? Self-storage can be created by converting old barns, building purpose built new ones or by having space that could be used for shipping containers on hard standing or with hard standing access.

• Planning requirement

It is important to speak to your local agent to consider whether full planning is required or whether you can proceed under permitted development rights. It is also key to understanding what health and safety requirements should be considered.

• Impact on the core business

A risk with any diversification is that it can distract you from the main business. You need it to add to the profitability of your business not to shift the profitability to a different area. Diversification can absorb resources such as time, space, capital and even head space.

• Investment required

No diversification comes without its costs. During the planning stage you should gain quotes for the investment required and, as with any project, you should leave a contingency.

• VAT

A minefield as usual and will depend on your business structure. If the turnover will be <£85k then becoming VAT registered could be optional, however, this would mean not reclaiming input VAT on the set-up costs. Assuming you are VAT registered, then rental income is exempt from VAT and therefore input VAT becomes subject to partial exemption rules. Self-storage is standard rated and caravan storage can be exempt or standard rated.

• Impact on other taxes

A topic within itself but you could be changing the use of agricultural land/buildings; potentially resulting in them becoming investment assets as opposed to trading. This has implications for income tax, capital gains tax and inheritance tax (IHT) and should be considered at the outset. For example, IHT may be 40% of the value of the land/building should it no longer qualify for relief, which could outweigh the benefits of the additional income generated by the project.

• Advertising

Remember, your customers are non-farmers and the easiest way to grow business is by word of mouth. The site will need to be clean and tidy and becoming a member of the Self-Storage association could also help. All that said, advertising for free on Facebook can also be extremely effective.

• Insurance

As with any changes you make on the farm, your insurers should be notified at an early stage.

Overall, storage can generate a very good return on capital utilising otherwise unproductive space. However, the above points do need to be considered as no matter how great the idea, if it is executed badly, it will not generate the steady diverse income stream desired and could potentially cause an additional unnecessary headache.