Why not just fund the VAT from cash?

You can, and many buyers do. The question is what that £100,000–£500,000 would otherwise be doing for three months. On a purchase followed by a fit-out or a works programme, the VAT bridge is usually cheaper than losing the deal or delaying the works.

How long does HMRC take to refund?

Commonly four to twelve weeks from filing, but a first reclaim of an unusual size will often trigger a verification check that adds a month or more. Facilities are written with that in mind, generally on a three to six month term.

What if HMRC refuses or reduces the reclaim?

You remain liable for the facility, which is why lenders want to see the option to tax documented and the VAT position confirmed by your accountant before drawdown. Getting the VAT advice right up front is the whole risk-management exercise on this product.

Can a VAT bridge be arranged after completion?

Sometimes, as a refinance of the cash you have already paid out, provided the reclaim has not yet been received. It is straightforward to arrange before completion and considerably harder afterwards.

Does the senior lender need to agree?

Yes — the VAT lender takes a second charge and a deed of priority, so the senior lender's consent is part of the process. This is routine, but it needs to start early rather than in completion week.

Commercial property finance

VAT Bridging Loan

A VAT bridging loan funds the VAT element of a commercial property purchase — typically 20% of the price on a property where the seller has opted to tax — and is repaid directly from your HMRC reclaim, usually within three to six months. It exists because the main lender will advance against the net purchase price only, leaving a large cash gap on completion day that would otherwise come out of your working capital. Lenders will fund up to 100% of the VAT sum, take a charge over the property alongside the senior lender, and require the reclaim to be assigned to them so the refund repays the facility directly.

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At a glance

Criteria and pricing

What lenders on our panel will typically do on this product today.

Advance: Up to 100% of the VAT payable
Typical facility size: £40,000 – £3,000,000+
Rate: From ~0.85% pcm, often quoted as a flat total cost
Term: 3–6 months, redeemable early on reclaim
Arrangement fee: Typically 1–2%
Security: Second charge behind the senior lender, plus assignment of the VAT reclaim
Requirement: Buyer VAT-registered and opted to tax the property
Exit: HMRC VAT refund paid direct to the lender

Worked example

Worked example — £1.2m commercial unit, seller opted to tax

Purchase price (net): £1,200,000
VAT at 20%: £240,000
Senior lender advance at 65% of net price: £780,000
VAT bridge: £240,000 (100% of the VAT)
Cost at 0.95% pcm over 4 months: ≈ £9,120
Arrangement fee at 1.5%: £3,600
Cash preserved on completion day: £240,000
Repaid by: HMRC refund, assigned to the lender

Figures are typical UK market ranges as at 2026 and are indicative only — your terms depend on the asset, the exit and the lender we place the case with.

Honest fit

Who this works for — and who it does not

You are likely to qualify if

The buying entity is VAT-registered before completion — this is non-negotiable
The property is opted to tax, or the option is being exercised by the buyer
A senior facility or cash purchase in place for the net price
VAT returns filed on time; a poor filing history slows the reclaim and worries the lender
Quarterly or monthly VAT accounting — monthly returns shorten the term and reduce cost

This is the wrong product if

Purchases where no VAT is chargeable, including most transfers of a going concern
Buyers who are not, and will not become, VAT-registered before completion
Anyone expecting HMRC to refund in weeks by default — plan on a full quarter and treat anything faster as upside
Residential purchases, which are exempt or zero-rated and have no reclaim to bridge against

Timescales

What actually happens, and when

Day 0–1
Structure check
We confirm VAT is genuinely payable, that the buyer is registered, and whether the transaction could instead qualify as a transfer of a going concern — which would remove the need for the loan entirely.
Day 1–3
Terms alongside the senior debt
The VAT facility is arranged in parallel with the main loan so both complete on the same day. Left to the last week, it becomes the reason completion slips.
Day 5–14
Legals and priority
Second charge and deed of priority agreed with the senior lender, reclaim assignment executed.
Post-completion
Reclaim and redemption
You file the return in the quarter of purchase; HMRC pays the refund to the lender and the facility redeems. Early redemption typically saves the unused months.

Questions

Frequently asked

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