How VAT bridging works

How a VAT bridging loan works

A VAT bridging loan bridges the gap between paying the VAT on a property purchase and reclaiming it from HMRC. Here is the full cycle, from completion to the refund that repays the loan.

Estimate the cost

The four steps

From completion to the HMRC refund

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.

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.

You reclaim it from HMRC

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

The refund repays the loan

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

Why it works

A defined amount, a known exit

Unlike open-ended bridging, a VAT bridge has a fixed amount (the VAT) and a defined exit (the HMRC refund). That makes it faster to arrange and keeps pricing keen.

The purchase completes with VAT

Your solicitor confirms the sale is standard-rated, so 20% VAT is payable on completion alongside the price.

We fund the VAT element

The bridge pays the VAT so completion is not delayed and your own deposit and working capital stay intact.

You reclaim the VAT

You are VAT registered, so you recover the VAT on your next VAT return to HMRC.

The refund clears the loan

HMRC's refund repays the bridge. Interest is charged only for the period the funds were outstanding.

The result: the tax stays off your deposit, the deal completes on time, and you carry the cost for only the few weeks until HMRC repays you.

FAQ

How VAT bridging works: FAQs

How does a VAT bridging loan work?

It funds the VAT charged on a property purchase at completion, then is repaid when HMRC refunds that VAT to you on your next VAT return, usually within one to three months. You pay interest only for the weeks the money is drawn.

What is the exit on a VAT bridge?

The exit is the HMRC VAT refund. Because the amount is defined and the refund is a known event, lenders treat VAT bridging as lower risk than open-ended bridging, which keeps pricing competitive.

How is the loan secured?

Usually by a charge over the property being bought, and sometimes a second charge behind your main purchase lender. The security package depends on the deal and the other funding involved.

How quickly can it complete?

Funds are commonly available within three to five working days once the purchase price, valuation and VAT position are confirmed. That speed suits auction and other time-critical completions.

Ready when your deal is

See what a VAT bridge would cost

Use the calculator for an instant estimate, or send us the deal for indicative terms.

Open the calculator