# VAT Bridging Loans for Commercial Property Source: https://www.cashbookfinance.co.uk/insights/vat-bridging-loans Last updated: 2026-10-26 Author: Bjorn Laku, Director & Chief Marketing Officer (https://www.bjornlaku.com/) Publisher: Cashbook Finance Limited > How a VAT bridging loan funds the VAT on a commercial property purchase until HMRC repays it - when VAT applies, timings, risks and what to prepare. FCA-registered UK lender FRN 782472 ## VAT bridging loans for commercial property. When a commercial property is sold with VAT charged (for example, where the seller has opted to tax), the buyer must pay VAT on top of the price at completion, even if they can reclaim it later. A VAT bridging loan is a short-term loan that funds that VAT until HMRC repays it, typically a few months later. Written and reviewed by [Bjorn Laku](https://www.cashbookfinance.co.uk/bjorn-laku), Director & CMO. Business bridging only: Cashbook Finance does not offer regulated bridging loans secured on a home the borrower or a close family member lives in. LTV · Property → short-term capital Illustration Bridging structure check A £325,000 loan against a £500,000 property Within reference **65%** loan-to-value, against a 70% illustrative reference point - **Equity remaining** £175,000 - **Headroom to 70% LTV** £25,000 Estimated property value · £500,000 Requested gross loan · £325,000 Within a 70% illustrative LTV reference point. **Security risk:** Your property may be repossessed if you do not keep up repayments on a loan secured against it. Check eligibility · Costs and exit **£30m+** funded · **100+** UK businesses since 2019 · London SE1 - FCA **782472** - ICO **ZB545200** - Companies House **10723098** ### Three things to confirm before completion. The VAT element only works as a bridge if it will genuinely be recovered. VAT applies #### Is VAT charged? VAT can apply where the seller has opted to tax or the building is new; a transfer of a going concern may mean no VAT at all. Recovery #### Can you reclaim it? The buyer needs to be VAT-registered and, where needed, to have opted to tax so the VAT can be reclaimed. Timing #### When will HMRC repay? Delays in registration or HMRC checks extend the loan and its cost. Check eligibility · About 2–3 minutes, no credit search. ### Raise the VAT position at the start. Share the purchase, the VAT treatment and your registration status, and we will give you a straight view on how the funding could be structured. ### The VAT is due at completion even if it is reclaimed later. When VAT is charged on a commercial property, the buyer pays it on top of the price at completion. A VAT bridge funds that amount until the reclaim is repaid, typically a few months later. If the VAT cannot be recovered, or recovery is delayed, the bridge has no natural exit. That is why the VAT position needs confirming by your solicitor and tax adviser before terms are agreed. - Confirm whether VAT is charged or a transfer of a going concern applies - Check VAT registration and the option to tax - Allow a realistic time for HMRC to repay Which suits you ### Is a VAT bridge the right tool? | Your situation | Usually the better fit | Why | | --- | --- | --- | | VAT charged, buyer registered and opted to tax | VAT bridge | The reclaim repays it | | Sale is a transfer of a going concern | Probably no VAT to bridge | TOGC sales may be outside VAT | | Buyer not yet VAT-registered | Register before completion | Delays push the repayment back | | VAT not recoverable (exempt use) | No VAT bridge | There is no exit | Worked example Check eligibility · About 2–3 minutes, no credit search. ### Bridging the VAT on a purchase. A company buys a £1,000,000 commercial building on which VAT is charged at 20%. It is VAT-registered and expects HMRC to repay the £200,000 in about 4 months. The VAT reclaim is the exit, so registration and the option to tax need to be in order before completion. Check eligibility · Talk it through with a director | VAT payable at completion (20%) | £200,000 | | --- | --- | | VAT bridge | £200,000 | | Arrangement fee, 1% | £2,000 | | Interest at 1% a month for 4 months | £8,000 | | Repaid from the HMRC repayment | £208,000 | | If HMRC repays 2 months later | +£4,000 in interest | Illustrative: interest at 1% a month, rolled up, and an [arrangement fee](https://www.cashbookfinance.co.uk/insights/bridging-finance-glossary#term-arrangement-fee) of 1% of the loan. Valuation and legal costs are extra and quoted per case. Bridging finance is secured against property, which may be repossessed if repayments are not maintained. Take tax advice on the VAT position. ### Check the VAT bridge has a clear exit. The reclaim is the repayment route, so it has to be reliable. #### Charge VAT confirmed as payable on the purchase. #### Recovery Registration and option to tax in place. #### Timing A realistic repayment date, with headroom. Illustrative guidance only; eligibility, pricing and terms are confirmed after review. Bridging finance is secured against property. Your property may be repossessed if you do not maintain repayments on a loan secured against it. Take independent tax advice on VAT. **Related guidance:** [Bridging finance](https://www.cashbookfinance.co.uk/bridging-finance) · [Pricing & decisions](https://www.cashbookfinance.co.uk/pricing-decisions) · [Eligibility](https://www.cashbookfinance.co.uk/eligibility) · [Case studies](https://www.cashbookfinance.co.uk/case-studies) Quick answers ### Common questions. Check eligibility · All questions **How long does HMRC take to repay VAT?** Often a few weeks to a few months, depending on your return period and any checks. Plan with headroom. **Can the VAT be part of the main bridge?** Often yes; it can be a separate facility or part of the purchase loan. **What if the sale is a TOGC?** A transfer of a going concern may mean no VAT is charged, so there may be nothing to bridge. **Do I need to be VAT-registered?** Yes, to reclaim the VAT. Registration and the option to tax should be in place before completion. Can’t see your question? Talk it through with a director #### Official sources - VAT on land and property (VAT Notice 742) · GOV.UK - Opting to tax land and buildings (VAT Notice 742A) · GOV.UK - Register for VAT · GOV.UK Official guidance and legislation on the rules this page refers to. They explain the rules in general; take advice on your own position. Check eligibility · About 2–3 minutes, no credit search. ### A practical note from the lender. **Bjorn Laku: commercial judgement** Bridging delays usually come from unclear security, weak exit evidence or legal details that should have been surfaced before the deadline became urgent. ### More guides on bridging finance - [Regulated vs unregulated bridging](https://www.cashbookfinance.co.uk/insights/regulated-vs-unregulated-bridging-loans) - [Bridging finance LTV guide](https://www.cashbookfinance.co.uk/insights/bridging-finance-ltv-guide) - [Bridging finance valuations](https://www.cashbookfinance.co.uk/insights/bridging-finance-valuation-guide) - [Bridging finance vs commercial mortgage](https://www.cashbookfinance.co.uk/insights/bridging-finance-vs-commercial-mortgage) - [Bridging vs development finance](https://www.cashbookfinance.co.uk/insights/bridging-finance-vs-development-finance) - [Bridging for limited companies and SPVs](https://www.cashbookfinance.co.uk/insights/bridging-loans-limited-companies-spvs) --- Cashbook Finance. Cashbook Finance Limited is registered with the Financial Conduct Authority under Firm Reference Number 782472. Company number 10723098. Registered office: Cumberland House, 24–28 Baxter Avenue, Southend-on-Sea, Essex SS2 6HZ. Registered with the Information Commissioner’s Office under reference ZB545200. All finance is subject to eligibility, satisfactory due diligence, credit approval and agreed terms. Invoice finance, trade finance and bridging finance may not be suitable for every business. The availability, structure, amount, pricing, fees, security requirements and completion timescales of any facility will depend on the applicant’s circumstances, the quality of the supporting evidence provided and our assessment of the proposed transaction. Any figures, examples, rates or timescales shown on this website are for illustrative purposes only and do not constitute an offer, commitment or guarantee of finance. Terms and conditions apply. Bridging finance is secured against property. Your property may be repossessed if you do not maintain repayments on a loan secured against it. Applicants should obtain independent legal, financial and tax advice where appropriate.