VAT bridging finance

Bridge the VAT gap on a property purchase

A VAT bridging loan funds the VAT charged on a property purchase, commercial or residential, then clears when HMRC refunds the VAT to you. It keeps the tax off your deposit and your working capital, so the deal completes on time.

How it works
At completion
You owe the VAT
£200,000 VAT bridged
HMRC refund
Repays the loan
The VAT bridge: We fund it in days
£50k to £15m
VAT funded
3 to 5 days
To funds
1 to 3 mths
To the refund
100%
Of the VAT
Whole-of-market VAT bridging lendersCommercial and residential propertyDecisions in principle same dayNo charge to enquire
How VAT bridging works

From completion to the HMRC refund

A VAT bridging loan covers the VAT on a property purchase for the short window between paying it and reclaiming it from HMRC.

01

You buy the property

The purchase is standard-rated, so 20% VAT is added at completion. This is common on commercial property and on conversions, new builds and mixed-use schemes.

02

The bridge pays the VAT

We fund the VAT element in days, so completion is not held up and your own cash stays in the deal.

03

You reclaim it from HMRC

On your next VAT return you recover the VAT, usually within one to three months of completion.

04

The refund repays the loan

The HMRC refund clears the bridge. You pay interest only for the weeks the money was out.

When a VAT bridge helps

Keep the tax off your deposit and your cash flow

Where a purchase is standard-rated, VAT is due at completion. A VAT bridging loan funds it so the deal is not held up and your working capital stays in the business.

Auction and fast completions

Won a lot with VAT added? A VAT bridge covers the tax inside the 28-day auction deadline.

Protect working capital

Fund the 20% VAT without draining the cash your business needs to trade after completion.

Conversions and development

Buying a commercial building to convert to residential? VAT on the purchase can be bridged and reclaimed.

Bridge the refund gap

HMRC can take weeks to repay. A short-term VAT loan closes the gap between paying and reclaiming.

Rates & costs

What a VAT bridging loan costs

VAT bridging is priced like short-term property bridging finance. Because the loan is secured and the exit is a defined HMRC refund, pricing is competitive for the risk.

Loan size
£50,000 to £15m of VAT (larger by referral)
Term
1 to 6 months, typically cleared in 1 to 3
Interest
Charged monthly, often rolled up and repaid from the refund
Arrangement fee
A percentage of the loan, added on completion
Security
A charge over the property, sometimes second charge behind the main lender
Worked example
£1,000,000
Purchase price
£200,000
VAT funded by the bridge

On a £1m standard-rated purchase the VAT is £200,000. A VAT bridge funds that £200,000 at completion; the HMRC refund on your next return repays it, so you only carry interest for a few weeks rather than tying up £200,000 of your own capital.

The complete guide

VAT bridging loans explained

A VAT bridging loan is short-term finance that pays the VAT charged on a property purchase. When a sale is standard-rated, for example because the seller has exercised the option to tax or the property is a new or converted building, 20% VAT is added to the purchase price at completion. Rather than fund that VAT from your own capital, a VAT bridge covers it and is repaid from the HMRC VAT refund.

Why VAT is charged on a property purchase

Commercial property is often exempt from VAT, but a seller can choose to charge it by exercising the option to tax. New commercial buildings and many conversion, new-build and mixed-use schemes are standard-rated too. Where VAT applies, it is 20% of the purchase price, payable on completion, and it can be a large amount of cash to find at short notice. A VAT bridging loan closes that gap.

How the loan is repaid

The exit is the HMRC VAT refund. Once you are VAT registered and the purchase appears on your VAT return, HMRC repays the VAT, usually within one to three months of completion. That refund clears the bridge, so you only carry interest for the weeks the funding is drawn. Because the amount is defined and the exit is a known refund, VAT bridging finance is fast and competitively priced against other short-term property bridging loans.

Commercial and residential purchases

Most VAT bridges fund commercial property, but VAT also arises on residential deals such as commercial-to-residential conversions, new-build developments and mixed-use schemes. In those cases a residential or conversion VAT bridge works the same way: fund the VAT at completion, reclaim it from HMRC, repay the loan. Where a tenanted commercial property is sold as a transfer of a going concern, no VAT is due and no bridge is needed. Always confirm the VAT treatment with your solicitor and accountant.

The process and the cost

The process is quick because the numbers are known. We confirm the purchase price, the VAT position and the exit, then place the case with the VAT bridging lenders whose criteria fit. Cost is a monthly interest rate on the VAT funding, usually rolled up and cleared from the refund, plus an arrangement fee. Some borrowers use a VAT bridge alongside a purchase or refinance facility, so the main lender funds the property and the bridge funds only the VAT.

FAQ

VAT bridging loan FAQs

What is a VAT bridging loan?

A VAT bridging loan is short-term finance that pays the VAT charged on a property purchase. When a sale is standard-rated, for example because the seller has opted to tax or the building is a new commercial or converted property, 20% VAT is added to the price at completion. The bridge funds that VAT so the deal completes, and it is repaid when HMRC refunds the VAT to you, usually within one to three months.

What is VAT bridging?

VAT bridging is borrowing the VAT element of a property purchase for a short period. Rather than funding the 20% VAT from your own cash and waiting to reclaim it, you take a VAT bridge that completes the purchase and is cleared by the HMRC refund. It is a common tool in commercial property finance, conversions and auction purchases.

Does VAT bridging apply to residential property?

Most straightforward residential sales are exempt or zero-rated, so no VAT arises. But VAT is commonly charged where a commercial building is bought to convert to residential, on some new builds and mixed-use schemes, and on opted or auction lots. In those cases a residential or conversion VAT bridge funds the VAT and is repaid from the HMRC refund. Always confirm the VAT position with your solicitor and accountant.

How is a VAT bridging loan repaid?

The exit is the HMRC VAT refund. Once you are VAT registered and the purchase is on your VAT return, HMRC repays the VAT you paid on the property, typically within one to three months of completion. That refund repays the bridge, so you carry interest only for the weeks the funds were drawn.

How quickly can a VAT bridging loan complete?

Because the amount is defined and the exit is a known HMRC refund, VAT bridges are fast. Funds are commonly available within three to five working days once the purchase details, valuation and VAT position are confirmed, which suits auction and other time-critical completions.

Can a limited company get a VAT bridging loan?

Yes. Most VAT bridging loans are taken by limited companies, partnerships and SPVs buying property. The borrower needs to be VAT registered so it can reclaim the VAT, because that reclaim is the loan's exit.

Ready when your deal is

Get indicative terms on a VAT bridge

Tell us the purchase price, the VAT position and your completion date. We come back with indicative terms. There is no charge to enquire.

Call 0203 000 0000