VAT Funding: Spread Your VAT Bill Into Monthly Payments
VAT funding pays your VAT bill now and lets you repay it over 3 months, usually for a single fixed fee. It suits established UK businesses that want to avoid one large quarterly cash outflow.
A named broker explains the cost, repayments and any security before you commit. No upfront broker fees, no obligation to proceed, and no hard credit search to enquire.
VAT funding in 30 seconds
- Cost: typically one fixed fee from around 4.5% to 13.5% of the bill. It is still borrowing, so compare the total repayable with paying HMRC directly.
- Term: 3 months with our primary VAT lenders.
- Personal guarantee: none typically required up to £150,000, subject to review.
- Payment: some lenders pay HMRC directly. Funding does not reduce the tax you owe.
- Not approved? We may use a short-term business loan with no early settlement fees to achieve a similar result.
VAT Funding Calculator
See what spreading your VAT bill over 3 months could cost with a fixed fee.
- Illustrative only. All applications are subject to lender review and the fee offered depends on your circumstances.
- No personal guarantee is typically available on VAT funding up to £150,000.
- If our primary VAT lenders can't help, we may be able to use short-term business loans with no early settlement fees to achieve a similar result.
VAT funding in practice
Law firm spreads its quarterly VAT bill into monthly payments
Andy Yates helped a North West law firm with £1m+ annual turnover arrange a reusable VAT facility with Premium Credit for one fixed fee, with no personal guarantee required. This individual outcome is not a guarantee for other applicants.
Read the full storyHow VAT Funding Works: Step by Step
The typical process with our primary VAT lenders. Every application is subject to lender review.
- 1
Fill out the online application form
Tell us about your business and your VAT bill. There are no upfront broker fees, and enquiring doesn't involve a hard credit search.
- 2
A named broker will be in touch
Your broker talks you through the options, the likely cost and anything the lender will need.
- 3
Provide your documents
Usually your VAT return, your last 6 months of business bank statements and your latest full accounts.
- 4
Extra information, if needed
Some lenders may ask for an HMRC account screenshot and your latest management accounts. Your broker will let you know if this applies.
- 5
We submit your application to our VAT lenders
We present your application to the most suitable lenders on our specialist VAT panel.
- 6
Hear back from the lender
We typically hear back within a few days. Timings depend on the lender and how quickly documents are provided.
- 7
Sign your agreement
If approved, the agreement is emailed to you for signing. Read it carefully. There's no obligation to proceed.
- 8
The lender pays HMRC directly
Once you've signed, you provide your HMRC payment details. The lender pays HMRC directly and sets up a 3-month Direct Debit for your repayments.
If our primary VAT lenders can't help, your broker may suggest a short-term business loan with no early settlement fees instead. The steps and timings for that can differ.
When VAT funding isn't the right answer
If repayments would squeeze already-tight cash flow, borrowing may add pressure rather than relieve it.
If you can pay the bill without affecting payroll or suppliers, paying HMRC directly is usually cheaper.
Some businesses may be better served by agreeing Time to Pay with HMRC. We'll tell you if we think that's the case.
What documents are needed?
- Latest full accounts
- Last 6 months' business bank statements
- Directors' details
- For larger bills: management accounts and an HMRC screenshot of your tax position
Requirements vary by lender; your broker will confirm what's needed.
What Tax Liabilities Can We Help With?
From quarterly VAT returns to import duties — we can help with most common HMRC liabilities, subject to lender review.
Spreading the Cost of Quarterly VAT Returns
The classic 'lumpy' cash-flow problem. Instead of a massive drain on your bank balance every three months, you pay in bite-sized chunks that keep your business running smoothly. For businesses on the Standard VAT Scheme, quarterly payments of £20,000–£100,000+ are common — spreading this over 3–6 months keeps your operating cash untouched.
Funding for Corporation Tax & PAYE Liabilities
It's not just VAT. Large year-end Corporation Tax bills or monthly PAYE spikes can be equally disruptive to your working capital. This funding covers all HMRC obligations, including National Insurance contributions and CIS deductions for construction firms.
Bridging Import VAT & Customs Duties
For businesses importing goods, the upfront VAT and duty costs can be a major barrier to stock replenishment — especially post-Brexit, where import VAT is now due at the port of entry for many goods. This funding bridges the gap between paying customs and selling the stock to your UK customers.
HMRC VAT Payment Plan vs VAT Funding
If you can't pay your VAT bill in full, a Time to Pay arrangement with HMRC is worth exploring first, and as a fair broker we'd always suggest you do. It can be a useful option. But it isn't right for every business, and it isn't always available.
HMRC payment plan
- Arranged directly with HMRC; interest is charged on the outstanding amount.
- Not always offered. HMRC decides case by case.
- May not be offered again if you've used one before.
- Some lenders don't like to see an active HMRC payment plan when you apply for other borrowing, such as a business growth loan.
VAT funding
- HMRC is paid in full, usually straight from the lender.
- You repay the lender over a fixed 3 months, typically for one fixed fee.
- Your HMRC account stays up to date, which can help if you plan to borrow more later.
- Subject to lender review. It's still borrowing, so compare the total cost.
What You Need to Know Before Applying
Avoid VAT Late Payment Penalties
For VAT periods from January 2023, HMRC replaced the old Default Surcharge with late payment penalties and late payment interest, which build up the longer VAT is unpaid (see HMRC guidance on GOV.UK). Arranging funding before the deadline can avoid these charges, but compare the funding cost too. If cash is very tight, HMRC's Time to Pay may suit some businesses better.
Opt for "Direct to HMRC" Payouts
Many of our specialist tax lenders can pay HMRC directly on your behalf. This can help make sure the payment reaches HMRC on time, removes the risk of the funds being accidentally used for other business expenses.
The ROI of Cash Preservation
Don't view a VAT loan as a 'debt'—view it as a cash-flow tool. If paying your £50k VAT bill upfront means you can't afford to buy discounted stock or hire a new salesperson, the 'opportunity cost' is huge. By spreading the VAT cost, you keep that £50k in your business to generate more profit than the interest on the loan will ever cost you.
VAT Funding by Sector
VAT funding for law firms, accountants, construction and retail businesses.
Eligibility Requirements
These are indicative requirements based on what most of our lenders look for. If your business doesn't fully match them, you can still enquire. A named broker will manually review your enquiry to see if a specialist product may be available.
Quick Eligibility Check
UK Registered Company
Your business must be either a limited company, LLP, sole trader or partnership in the UK
Monthly Turnover £10k+
Minimum monthly turnover of £10,000 to qualify for funding
6+ Months Trading
At least 6 months of established trading history required
UK Resident Director
At least one director or shareholder must be a UK resident
Don't quite match?
You can still apply online or contact us. A named broker will manually review your enquiry and let you know if a specialist product may be available.
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VAT Funding Scenarios From the SME Finance Hub Desk
Three illustrative examples of how UK SMEs could spread their VAT bills — turning a lumpy quarterly hit into a predictable monthly expense.
Here's how this type of facility could work for a business in this position. These are illustrative examples, not specific client cases.
Quarterly VAT spread for a construction firm
The type of business
A groundworks contractor with a £58,000 quarterly VAT bill landing the same week as a £40,000 wages run.
What they needed
£55,000 to settle VAT in full and free up cashflow for payroll without missing either deadline.
How it could be structured
3-month VAT loan repaid in three equal monthly instalments, aligned with the next VAT quarter. Unsecured, personal guarantee from two directors.
Likely outcome
Both VAT and wages paid on time. The contractor now runs the same facility every quarter — borrow, repay, repeat — as a predictable rolling tool.
Annual accounting scheme catch-up
The type of business
A retailer on the VAT Annual Accounting Scheme facing a £95,000 balancing payment after a stronger-than-forecast year.
What they needed
£90,000 to settle the annual balance in full, smoothed over the new financial year.
How it could be structured
12-month loan structured to match the new VAT year, with monthly repayments lower than the equivalent quarterly hit would have been.
Likely outcome
Annual VAT cleared without disrupting Q4 stock orders for the Christmas trading run.
Catch-up on missed VAT returns
The type of business
A digital agency that had fallen one quarter behind on VAT, with a £36,000 combined liability and a Time-to-Pay request already rejected by HMRC.
What they needed
£36,000 to clear the arrears in a single payment before further penalties and interest built up.
How it could be structured
6-month short-term loan, underwritten quickly on bank statements rather than full filed accounts.
Likely outcome
Arrears cleared inside 5 working days. Arrears cleared and the business is now on monthly accounting and uses the same facility quarterly.
Illustrative example. Rates, advance rates and timescales vary by lender and circumstances. For real, completed deals see our client success stories.
Each business chose finance over draining cash reserves because the cost of the loan was significantly less than the trading opportunity that cash unlocked.
Common Questions About VAT Funding
Don't Let a Tax Deadline Stall Your Growth
Spread the cost, protect your cash flow, and keep HMRC happy — all with no upfront broker fees.