VAT bridging: funding the 20% you're about to get back

When VAT is charged on a commercial property purchase, you must fund it on completion day and reclaim it from HMRC afterwards. A VAT bridge covers that gap — but the first question a chartered accountant asks is whether you need to pay the VAT at all.

The problem, precisely

Where the seller of a commercial property has opted to tax it, VAT at 20% is added to the price. On a £1.5m purchase that is £300,000 of additional cash on completion day — money your commercial mortgage typically will not cover, because the lender advances against the property's value, not the VAT on top of it. If your company is VAT-registered and will use the property for taxable purposes, that £300,000 comes back from HMRC — but on HMRC's timetable, not completion day's.

How the VAT bridge works

A short facility — typically running a few months — advances the VAT amount at completion, secured on the transaction. The exit is the HMRC repayment itself: your VAT return (or a claim ahead of the normal cycle where circumstances justify it) generates the refund, which repays the bridge. Because the exit is a receivable from HMRC rather than a sale or refinance, lenders treat well-prepared VAT bridges as clean, short, self-liquidating lending — which is reflected in how they view the risk.

"Well-prepared" is the operative phrase. The reclaim only lands cleanly if the VAT position is right: registration in place in the correct entity, the option to tax handled properly, the return ready to file promptly after completion. That preparation is accountancy, not salesmanship — and it is precisely what we do before the facility is placed.

What it costs, honestly

Monthly interest for a small number of months, plus an arrangement fee — modest in the context of a transaction, and usually far cheaper than the alternatives people reach for under deadline pressure: renegotiating completion, borrowing the VAT on expensive unsecured terms, or draining the working capital the business needs the week it takes the keys. We put the total cost in writing against your realistic reclaim timetable before you commit, and our commission from the lender is disclosed in writing as standard.

What lenders need to see

• The purchase details and the option-to-tax position — evidence VAT is genuinely chargeable.
• VAT registration of the buying entity, and that the reclaim will be recoverable in full.
• The reclaim plan: who files, when, and the computation supporting it.
• The usual: ID, company accounts, and the wider funding stack for the purchase.

Assembled properly — pre-underwritten, in our language — this is one of the quickest facilities in commercial lending to place. Assembled badly, it is queries and delay in the exact week you cannot afford them.

Timing

VAT bridges routinely complete inside the window between exchange and completion. If your completion date is close, start now: the reclaim paperwork takes days when organised and weeks when it isn't. It also pairs naturally with the wider purchase funding — see how bridging works — which we arrange as one coherent stack rather than two disconnected loans.