VAT loans
Got a VAT bill you’re struggling to pay? A VAT loan could help you meet your HMRC obligations and improve your cash flow.
What is a VAT loan?
VAT-registered businesses must make VAT payments to HMRC typically every three months. A VAT loan can help if your business does not have the funds to pay what’s owed, lending you the funds needed to cover your VAT bill.
VAT finance means you can spread the cost of the bill over time, improving your cash flow and not putting unnecessary pressure on your working capital.
Value Added Tax (VAT) is the government’s third-largest source of tax revenue collected by HMRC, behind income tax and national insurance contributions.
HMRC therefore takes the non-payment of a VAT bill very seriously, and non-payment can lead to insolvency in the worst-case scenario. So a VAT loan could help keep you in business if you are struggling to pay your bills on time.
These loans are intended to be a temporary solution to tide you over until they are replaced with long-term funding or the property is sold, so expect loans to typically be a maximum of 12 months.
Perhaps you’ve seen a property at auction and can’t get a commercial mortgage in time to complete the sale? The bridging loan would give you the finance to buy the property.
Or perhaps you are buying a property that a traditional lender wouldn’t touch because it needs extensive renovations? You could use a bridging loan to buy the property and do the renovations. Once these have been done, you would apply to another lender to take out a long-term mortgage and pay off the bridging loan.
Thoughts from Matt
“VAT is applied to most goods and services sold in the UK. With the standard rate at 20%, a VAT bill can be a blow if you haven’t planned properly and your business has limited cash flow available.
A VAT loan will keep HMRC off your backs and give you more time to pay the bill. We offer VAT loans to businesses of all sizes across all industries. You are certainly not alone if you are struggling to meet your VAT requirements – thousands of firms struggle to pay their VAT bills each year.
Get in touch with us today and let us help take the pressure off your cash flow.“
Matt Haycox
Founder and CEO, Funding Guru
How does a VAT loan work?
Below are the main steps of a VAT loan
- Contact us through our website
- One of our experts will review your application promptly and be in touch
- A decision will be made within 24 hours
- If you are approved for funding, we pay what’s owed to HMRC directly
- You then pay us back in instalments spread over the next 3 months
What are my VAT responsibilities?
You must register for VAT if your company’s taxable turnover is more than £85,000 a year.
This means your business must:
- Add VAT to the price of the goods and services you sell
- Record how much VAT you pay when you buy goods and services for your business
- Tell HMRC how much VAT you have charged your customers, and what you have paid in VAT, through a VAT return every quarter
- Pay HMRC the VAT owed every three months
VAT is typically 20% but some items are not liable for VAT, such as children’s clothes, books, cold takeaway food and lottery tickets.
You will be given a unique VAT number, which must be listed on all sales and invoices.
What if I can’t pay my VAT bill?
VAT bills are due every three months, and your next payment date can come around all too soon.
Ideally you would have kept the money set aside. But in reality, many businesses need as much cash as they can to keep on top of costs and to invest in growing the company.
It’s not recommended you try to avoid paying your bill. From 1 January 2023, HMRC has put in place new penalties for VAT returns that are submitted late. It means you face a potential £200 fixed penalty for late payments, alongside further daily penalties. Meanwhile interest is accrued from the due date until the full payment is made. The interest is the Bank of England base rate plus 2.5%.
The charges can quickly mount up and you will have to pay your VAT bill eventually. You could aim to make an arrangement with HMRC, or you could take a VAT loan with Funding Guru to pay your bill as quickly as possible.
Pros of a VAT loan
Paying what’s due will satisfy HMRC and ultimately keep you in business.
You can spread the bill payments over time, keeping your cash flow more steady.
VAT loans are quick and simple to arrange. We can give you a decision within hours.
Cons of a VAT loan
Like any borrowing, you will pay interest on the loan – increasing your total bill. The interest rate can be higher than other types of business loans. Although the interest rate can often be less than the cost of a VAT penalty and it is certainly worth considering paying the interest rather than getting on the wrong side of HMRC.
Loans are typically granted one quarter at a time. You can apply multiple times but you risk your total borrowing getting bigger than you can handle.
How much can I borrow with a VAT loan?
At Funding Guru, we typically loan anything from £25,000 to £500,000 for VAT loans. But we take a very flexible approach to lending, and consider each case individually, so get in touch if you are looking for funding outside these amounts.
The interest rate charged on a VAT loan will depend on your circumstances and the nature of your business.
Number of VAT-registered businesses in the UK
The number of companies registered to pay VAT has remained steady over the past five years, official data shows. Around half of all companies are registered to pay VAT.
Contact Us
VAT bills can be a hefty blow, they don’t need to put pressure on your business. Give us a call on 0333 006 9141, contact us online for a VAT loan today. One of our experts will get back to you the same day.