How long does a VAT refund take, and why buyers bridge the wait

HMRC aims to process a repayment return quickly. The gov.uk guidance is that you should normally receive a VAT refund within 30 days of HMRC receiving your VAT return, paid straight to the bank account held on your VAT record. In many clean cases the money arrives well inside that window.

Two things matter here. First, the clock starts when HMRC receives the return, not when you complete the purchase, so the sooner your return goes in after the VAT quarter, the sooner the HMRC VAT refund can land. Second, 30 days is a target rather than a guarantee. Where the figures are large relative to your usual trading, which is common on a property purchase, HMRC may look more closely before releasing the money.

Most delays come down to HMRC verification. A property VAT reclaim is often far bigger than a business's normal VAT return, and a large repayment can trigger a review before HMRC pays. You may see the status move to sending for further checks, which means the return has been referred for verification rather than paid automatically.

Common reasons a VAT refund takes longer than the standard window include:

• The repayment is large or unusual compared with your trading history.
• HMRC wants to confirm the option to tax was validly in place, so the sale was genuinely standard rated rather than exempt.
• The purchase could have qualified as a transfer of a going concern, and HMRC checks whether VAT should have been charged at all. A genuine TOGC means no VAT is due when the conditions are met.
• Invoices, the VAT registration or bank details do not match, or paperwork is requested and takes time to return.

You can respond quickly and provide documents, but you cannot control HMRC's queue. That uncertainty, not the reclaim itself, is what makes the wait a cash flow risk.

When commercial property VAT applies, you pay 20% on top of the purchase price at completion. On a seven figure deal that is a very large sum leaving your account, on top of the deposit, legal costs and Stamp Duty Land Tax. SDLT is calculated on the VAT inclusive figure where VAT is charged, so an opted property costs more to complete than the headline price suggests.

Your commercial mortgage or development finance is usually advanced against the net purchase price, not the VAT. That leaves the buyer to fund the VAT from their own cash and then wait for the VAT refund. For an auction purchase, where completion is fixed at 28 days, there is rarely time to free that cash from elsewhere, which is why auction finance and a VAT bridge often run together.

A VAT bridging loan is short term finance that funds the VAT element of a property purchase so you do not have to find it from working capital. We arrange the VAT bridge alongside your main facility: the mortgage covers the net loan against the property, and the VAT bridging finance covers the 20% due at completion.

The mechanics are simple. The gross loan is drawn to pay HMRC's VAT at completion, interest is usually charged as monthly interest or set up as interest roll-up so there is nothing to service during the short term, and an arrangement fee applies as with any bridging loan. When your HMRC VAT refund arrives, that money repays the bridge. The refund is the exit, so the clearer your exit strategy, the smoother the repayment.

Security is normally a first charge or a second charge sitting behind your main lender, and the LTV reflects that the loan is repaid from a VAT refund rather than a long term sale or refinance. Because this is bridging finance secured on commercial property, it is business lending and is not regulated by the FCA.

You cannot set HMRC's timetable, but good paperwork removes the reasons a VAT refund gets held. Before completion, make sure:

• The buying entity is VAT registered and the registration details match the invoice and the property.
• The seller's option to tax is confirmed in writing, so it is clear the sale is standard rated and the VAT is genuinely reclaimable.
• You have checked with your solicitor and accountant whether the deal is instead a transfer of a going concern, because a valid TOGC means no VAT should change hands.
• A correct VAT invoice from the seller is held for the VAT return on which you make the reclaim.
• The bank details on your VAT record are current, so HMRC can pay the refund without a query.

Filing the return promptly after completion, rather than waiting for the quarter end, also shortens the wait. Please treat this as general information and confirm your position with your accountant, as nothing here is tax or financial advice.