Commercial VAT bridging loans for property buyers

A VAT bridging loan suits buyers who have funded the net price of a commercial property but do not want to lock up a further 20% for the weeks it takes HMRC to process the refund. That is a large sum on any commercial deal, and most buyers would rather keep it working elsewhere.

We arrange VAT bridging finance for:

• Investors and owner-occupiers buying offices, retail units, warehouses, industrial premises and mixed-use buildings where the sale is standard rated.
• Limited companies, partnerships, LLPs and individuals, provided the buyer is VAT registered and able to reclaim.
• Buyers pairing the bridge with a commercial mortgage or development finance, where lenders will not advance against the VAT element.
• Auction buyers who need certainty of funds before the hammer falls, alongside their auction finance.

The common thread is simple. The VAT is recoverable, but the money is due now and the refund comes later. We fund the difference.

Speed is the point of a bridge. Because a VAT bridging loan is a self-liquidating piece of short term finance with a clear exit, it can be underwritten far more quickly than a term facility. Where the purchase is straightforward and your solicitor is ready, we can often move from enquiry to funds inside days rather than weeks.

What keeps things fast is having the right information early: the purchase contract, evidence of the seller's option to tax, your VAT registration details and confirmation of the completion date. An auction purchase with a fixed deadline is exactly the kind of case a VAT bridge is built for, and we prioritise those timelines. Talk to us as soon as you have a deal in sight and we will tell you honestly whether the timescale is realistic.

Pricing on a VAT bridge reflects that it is fast, short and secured. The main costs are monthly interest and an arrangement fee, and because the term is short, the total cost is modest against the size of the VAT being funded.

• Monthly interest. Charged for the weeks the loan runs. On most VAT bridges the interest is set to interest roll-up, so nothing is payable monthly and the whole balance is settled at the end from your refund.
• Arrangement fee. A percentage of the loan, usually added to the facility rather than paid upfront.
• Legal and valuation costs where a lender requires them.

We do not publish a single rate because the price depends on the security, the loan size, the LTV and the strength of your exit strategy. Tell us the deal and we will give you real numbers, not a headline figure. Nothing here is financial advice.

The gross loan is the total facility, and the net loan is what reaches the deal after fees. Most VAT bridges are secured by a charge over the property being bought or another asset you own. Where your main lender already holds a first charge for the purchase, the VAT bridge often sits behind it as a second charge. We structure whichever charge the case allows.

Repayment is the clean part. Your exit is the HMRC VAT refund. You complete the purchase, submit your VAT return for the relevant period, and HMRC repays the reclaimed VAT. That VAT refund then clears the bridge in a single repayment. Because HMRC controls the timing, we build in enough headroom on the term to cover normal processing, and we work with your accountant to file promptly so the refund is not delayed.

Not every commercial purchase carries VAT, so the first job is confirming that a bridge is actually needed. Older commercial property is often exempt from VAT by default. It becomes standard rated when the seller has exercised the option to tax, which is a choice the owner makes to charge VAT and recover their own input tax. New commercial buildings are standard rated in their own right.

There is one important exception. A genuine transfer of a going concern, or TOGC, means no VAT is due on the sale where the conditions are met, typically where a tenanted, income-producing property changes hands as a running business. If your deal qualifies as a TOGC, you may not need a VAT bridge at all. This is nuanced, and getting it wrong is costly, so always confirm the commercial property VAT position with your solicitor and accountant before you rely on it. Note too that VAT does not affect your Stamp Duty Land Tax in isolation, but SDLT is charged on the VAT-inclusive price where VAT applies, so factor both into your cash planning.

A VAT bridge is deliberately narrow. It funds one thing, the VAT, and repays from one source, the refund. That makes it cheaper and faster to arrange than general bridging finance raised against the whole purchase, because the exit is defined and short-dated rather than dependent on a sale or refinance.

It is not a substitute for your main funding. You still need a commercial mortgage for a standing investment, or development finance if you are building or converting. The VAT bridging loan simply sits alongside those, covering the tax so your primary facility is not stretched to fund money you are about to get back from HMRC. If you would rather not use a bridge, the alternative is to fund the VAT from your own reserves and wait for the refund, which many buyers prefer to avoid on a large commercial deal.

Getting started is quick. Send us the basics of your purchase: the property type, the net purchase price, whether the seller has opted to tax, your VAT registration status and your target completion date. We will tell you whether a VAT bridge fits, sketch the likely cost and term, and set out the exit against your VAT return.

VAT bridging on commercial property is commercial lending and is not regulated by the Financial Conduct Authority. Nothing on this page is tax or financial advice, and you should confirm your VAT position with your own solicitor and accountant. When you are ready, contact us and we will move at the pace your deal needs.