VAT Bridging Loans | Low Rates From 6.5% APR

VAT Bridging Loans | Fast Bridging Finance

VAT Bridging Loans

When purchasing commercial property in the UK, the buyer may be required to pay VAT at 20% on the purchase price — potentially adding hundreds of thousands or even millions of pounds to the acquisition cost. While this VAT is recoverable from HMRC, the repayment process takes 3-6 months, creating a significant cash-flow gap between the VAT payment on completion and the HMRC refund. VAT bridging loans provide the short-term capital to fund the VAT element of a commercial property purchase, bridging the period until the HMRC repayment is received.

Platinum Global Bridging Finance arranges VAT bridging loans from our office at 64 Knightsbridge, London. We structure VAT facilities from £100,000 to £10 million alongside or independently of the main acquisition bridging loan. Indicative terms are delivered within 24 hours.

What Are VAT Bridging Loans?

VAT bridging loans are specialist short-term loans used to fund the VAT payable on a commercial property purchase. The loan covers the 20% VAT element, is secured against the property being acquired (usually alongside the main acquisition finance), and is repaid when HMRC processes the VAT reclaim — typically within 3-6 months of completion.

Not all commercial property transactions attract VAT. VAT is payable when the vendor has opted to tax the property (elected to charge VAT on the sale) and the transaction does not qualify for the Transfer of a Going Concern (TOGC) exemption. Your solicitor and accountant will confirm the VAT position during the due diligence process. When VAT is payable, the amount can be substantial — 20% of a £2 million commercial purchase is £400,000, and on a £10 million transaction, £2 million.

When VAT Bridging Loans Are Needed

Commercial Property Acquisitions

The primary use case. A buyer is acquiring a commercial property — office, retail, industrial, or mixed-use — where the vendor has opted to tax. The buyer is VAT-registered (or will register before completion) and can reclaim the VAT, but needs to fund the payment on completion day. The main commercial bridging loan covers the net purchase price; the VAT bridge covers the 20% VAT element.

Portfolio Acquisitions

Investors acquiring portfolios of commercial properties may face VAT on multiple transactions simultaneously, creating a cumulative VAT liability that exceeds available cash. A VAT bridge covers the aggregate VAT payment across the portfolio.

Auction Purchases

Commercial properties sold at auction where the vendor has opted to tax require the VAT to be paid within the 28-day completion deadline.

Development Purchases

New-build commercial property and certain development land transactions attract VAT. Developers acquiring sites or completed commercial buildings need VAT bridging to fund the tax element while the HMRC reclaim is processed.

How VAT Bridging Loans Work

The VAT bridge is arranged alongside the main acquisition finance — often from the same lender as part of a combined facility, or from a separate specialist VAT lender. On completion, the VAT bridging funds are released to the solicitor alongside the main loan and the buyer’s deposit. The full purchase price including VAT is paid to the vendor. Immediately after completion, the buyer’s accountant submits a VAT return to HMRC claiming the input tax. HMRC processes the claim (typically within 30-90 days for established VAT-registered businesses) and refunds the VAT directly to the buyer’s bank account. The buyer uses the HMRC refund to repay the VAT bridge in full.

The exit strategy is uniquely strong — a VAT reclaim from HMRC is as close to a guaranteed repayment as exists in bridging. This is reflected in the terms: VAT bridging typically attracts lower rates and fees than standard bridging because the lender’s risk is minimal once the VAT return has been submitted.

Worked Example: VAT on a £3 Million Office Purchase

An investor is acquiring a multi-let office building in Hammersmith for £3 million. The vendor has opted to tax the property, so VAT of £600,000 is payable on completion. The investor is purchasing through a VAT-registered SPV.

Main acquisition bridge: £2.1 million (70% LTV on the net price). VAT bridge: £600,000. Combined facility: £2.7 million. VAT bridge interest rate: 0.50% per month, rolled up. VAT bridge term: 6 months. HMRC processes the VAT reclaim at month 3. Total VAT bridge cost: approximately £9,000 in interest plus £6,000 arrangement fee = £15,000. Without the VAT bridge, the investor would have needed an additional £600,000 in cash on completion.

VAT Bridging Loans: What We Arrange

Loan sizes from £100,000 to £10 million (covering the VAT element only). Interest rates from 0.45% per month — among the lowest in bridging, reflecting the strength of the HMRC refund as an exit. Terms from 1 to 6 months. Can be structured as a standalone facility or combined with the main acquisition bridge. Available to VAT-registered individuals, limited companies, and SPVs. We charge no broker fee on facilities of £500,000 or above.

Key Considerations for VAT Bridging Loans

The buyer must be VAT-registered (or register before completion) to reclaim the VAT. If the buyer is not VAT-registered and the property is subject to VAT, the 20% becomes an irrecoverable cost — VAT bridging does not help in this scenario because there is no HMRC refund to provide the exit. TOGC (Transfer of a Going Concern) treatment can sometimes be applied to avoid VAT entirely — this requires the property to be sold as a going concern with existing tenants. Your solicitor and accountant should assess whether TOGC applies before assuming VAT is payable. HMRC processing times vary — established businesses with clean VAT histories typically receive refunds within 30-60 days, but HMRC may raise queries or conduct compliance checks that delay the refund to 90+ days. The bridge term should accommodate this variability.

Frequently Asked Questions

Can I combine VAT bridging with my main acquisition loan?

Yes. Many lenders offer combined acquisition-plus-VAT facilities under a single agreement, simplifying the legal process. Alternatively, the VAT element can be arranged separately from a specialist VAT lender.

What if HMRC delays the VAT refund?

HMRC may raise queries, request supporting documentation, or conduct a compliance visit before processing the refund. The bridge term should allow for this — we recommend a 6-month term even though most refunds are received within 3 months. If the refund is delayed beyond the bridge term, a short extension is usually available.

Are VAT bridging loans available for residential property?

Residential property is generally exempt from VAT, so VAT bridging is not typically needed. Commercial property (offices, retail, industrial) is the primary market.

Does Platinum Global charge a fee?

No broker fee on facilities of £500,000 or above.

Related Bridging Loans

• Bridging Loans — our main UK bridging loans page
• Commercial Bridging Finance
• Auction Bridging Loans
• Limited Company Bridging Loans
• Large Bridging Loans
• London Bridging Loans