Does a VAT loan affect my credit or other facilities?

It is a credit facility and will be visible to other lenders and on the company file. Most invoice finance and asset finance providers are comfortable with it; a bank with a debenture may need to consent, which we check first.

Is a VAT loan cheaper than HMRC's time to pay?

HMRC charges interest and applies default surcharges of 2–15% of the liability for late payment, and a time-to-pay arrangement is recorded and affects future credit applications. A VAT loan at 11% APR over six months usually costs less and leaves no arrears record.

Can I fund corporation tax the same way?

Yes — the same lenders write corporation tax and self-assessment funding on near-identical terms, and often a single facility covering both.

How is this different from a VAT bridging loan?

A VAT bridging loan is secured against a commercial property and repaid from the HMRC reclaim after purchase. A business VAT loan funds an ordinary quarterly liability and is usually unsecured, repaid from trading income.

Can the loan be paid straight to HMRC?

Yes, and it usually is. It removes any question about whether the liability was settled and means the payment reference and deadline are handled by the lender.

Business and tax funding

VAT Loan

A VAT loan spreads a VAT liability that is due now over a series of monthly payments, protecting working capital and avoiding HMRC surcharges and time-to-pay negotiations. There are two distinct products under the same name: a business VAT loan, which funds a quarterly return over three to twelve months and is often unsecured for established, profitable companies; and a property VAT bridge, which funds the VAT element of a commercial property purchase until the reclaim is received. Business VAT loans are usually priced on an annual rate in the region of 8–16% APR depending on covenant, decided in 24–72 hours against filed accounts and bank statements rather than assets.

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At a glance

Criteria and pricing

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

Facility size: £10,000 to £3m+
Term: 3–12 months, monthly repayment; 3–6 months for a property VAT bridge
Pricing: Typically 8–16% APR unsecured; property VAT bridges priced monthly
Security: Often unsecured with a personal guarantee; debenture on larger facilities
Decision time: 24–72 hours on a complete pack
Trading history: Usually 2 years of filed accounts; 12 months considered
Arrangement fee: 0–2%
Early settlement: Generally permitted with unused interest rebated

Worked example

Worked example — £120,000 quarterly VAT bill spread over 6 months

VAT liability: £120,000
Facility: £120,000, paid directly to HMRC
Rate: 11% APR
Monthly repayment: ≈ £20,640
Total cost of finance: ≈ £3,840
Working capital retained for the quarter: £120,000
HMRC default surcharge avoided: 2–15% of the liability

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

UK VAT-registered limited company, LLP or partnership
Filed accounts and up-to-date VAT returns — the return must be submitted, not estimated
Recent bank statements showing the business services its commitments
No undisclosed time-to-pay arrangement in default with HMRC
Director's personal guarantee on most unsecured facilities

This is the wrong product if

Businesses already in a failed time-to-pay arrangement or facing a winding-up petition — that needs restructuring advice, not more debt
Structural losses: a VAT loan is a timing tool, not a solution to a business that cannot generate the cash
Sole traders below the registration threshold
Property purchases where the VAT position has not been confirmed by an accountant

Timescales

What actually happens, and when

Day 0
Submit the pack
Filed VAT return, last two years' accounts, three months of bank statements. Incomplete packs are the only reason this product is slow.
Day 1–2
Decision and terms
Credit decision on covenant strength. Property VAT bridges also require the purchase contract and evidence of the option to tax.
Day 2–4
Documentation
Facility agreement and direct debit mandate executed electronically.
Before the due date
Payment to HMRC
Funds are usually paid directly to HMRC so the liability is settled on time and no surcharge accrues.

Questions

Frequently asked

VAT bridging loan Commercial finance Short-term commercial finance Commercial property finance