What are VAT Bill loans?
VAT loans are unsecured, with repayments typically spread over 3 months. Often, no PG is required and VAT funding can be renewed on a draw-down basis each quarter.
Businesses can access between £1,000 and £500,000, repaying the money in small monthly installments with interest. After applying for a VAT bill loan, you can expect the funds to be released within 24 hours.
The facility is easy to set up and, once active, can be renewed quarter on quarter, on a rolling basis.
With a short term VAT loan, often there is no requirement for a personal guarantee.
What businesses apply for VAT bill loans?
All businesses that are required to make regular VAT bill payments can apply for VAT funding. Any business that suffers from irregular cash flow could benefit from a commercial VAT loan. Turning a quarterly payment in advance into a monthly payment in arrears improves and steadies cash flow.
We receive applications from a variety of business types from a diverse range of industries. Typical applicants include:
Applying For A Loan To Pay A VAT Bill
Click on the application page. To ensure we match you with the best lender, we will ask for more information about your business. Please be ready to tell us:
- The name of your business
- The number of years you’ve been in business
- Your average monthly card sales
- The amount you are looking to borrow to cover your VAT bill obligations
You will then be directed to the next step, where you will be asked to disclose:
- Your title, first name and surname
- Your position in the business
- Your email and telephone number
Carefully read through the terms and conditions, if happy, click ‘get my quote’. From here, one of our approved business finance suppliers will help you find the correct lender for your VAT bill loan, and will process and review your application.
One of our account managers will be in touch by phone or email to discuss the terms of your loan or advance agreement.
After carefully reading through the terms of agreement, please sign the relevant documentation and return it to the lender. You will then be able to access the funds in your account in just 24 hours.
Everything You Need To Know
What Is VAT?
Understanding Business VAT Loans
Can I Take A Loan To Pay A VAT Bill?
VAT Bill Finance
Can I Arrange A Payment Plan With HMRC To Pay VAT?
HMRC’s Payment Plans
VAT Bill Loans FAQs
Frequently Asked Questions
WHAT IS VAT?
Understanding Business VAT Loans
VAT stands for Value Added Tax, and it is a tax charged on VAT registered businesses that sell goods or services. This sales tax is collected by businesses on behalf of the UK government, and is charged to customers at a rate set by HM Revenue & Customs.
The rate also depends on what is being sold, but, typically, supplies get taxed at 20%. There are three main tax rates that businesses should be aware of:
· Standard rate – 20% (most goods and services)
· Reduced rate – 5% (energy supplies in home, gas and electricity)
· Zero rate – 0% (most food items, public transport, children’s clothing, books and newspapers)
When Do I Register For VAT?
When your business grows and gets to a stage where its annual sales of taxable goods and/or services exceed the £85,000 VAT threshold, you must register for VAT.
After registering, HMRC will send you a VAT registration certificate which confirms your VAT number, when to submit your first VAT Return and payment and your ‘effective date of registration’.
Businesses can also choose to voluntarily become VAT registered, providing that the goods and services they sell aren’t exempt from VAT charges. After registering, there are certain legal responsibilities that business owners must follow including:
- Charging the right amount of VAT
- Paying any VAT due to HMRC
- Submitting VAT returns
- Keeping VAT records and a VAT account
Business owners of registered UK businesses are typically required to submit a VAT Return to HMRC every 3 months, regardless of whether the business has any VAT to pay or reclaim. This 3 months is referred to as your business ‘accounting period’, and the VAT Return records:
- Your total sales and purchases
- The amount of VAT owed
- The amount of VAT that can be reclaimed
- What your VAT Refund from HMRC is
Paying Your VAT Bill
You must pay your business’ VAT bill before the deadline passes. The deadline will be shown on your VAT Return and the only exception to deadlines are if you use the Annual Accounting Scheme or ‘payments on account’. As with Corporation Tax, you must ensure your payment reaches HMRC’s bank account before the deadline. Surcharges apply if you don’t manage to make payments on time.
|Payment Method||Time Taken|
|CHAPS||Same day / next day|
|Online Banking||Same day / next day|
|Telephone Banking||Same day / next day|
|Direct Debit||3 working days|
|1st Time Direct Debit||5 working days|
|Bacs||3 working days|
|Bank / Building Society||3 working days|
HMRC sets up VAT online accounts for all businesses registered for VAT. You can check your VAT Return and payment deadlines online.
How To Pay Your VAT Bill
Businesses are required to pay VAT to HMRC electronically, most commonly through internet banking and direct debit. The latest rules state most businesses are not allowed to pay by cheque. If you are having issues paying your VAT, get in touch with HMRC as soon as you can.
CAN I TAKE A LOAN TO PAY A VAT BILL?
VAT Bill Loans
After setting up an established company, several business owners cite their first stumbling block in business as knowing how to treat and manage VAT. Particularly true in the early stages of trading, as the owner of a startup it’s likely you’ll be involved in all areas of operations, including VAT obligations.
Owing the government money is a situation that no business owner wants to end up in, but without enough solid working capital it can be difficult to make payments on time. At SME Loans, we offer VAT bill loans that provide a quick, secure way of financing VAT bills. The loans we offer are short-term, which suits the 3 month accounting period caps that HMRC sets.
CAN I ARRANGE A PAYMENT PLAN WITH HMRC TO PAY VAT?
HMRC’s Payment Plans
If you don’t manage to pay your VAT bill before the deadline, be aware that HMRC will likely take ‘enforcement action’ as a way of getting the money from you. In the event you can’t pay your bill, or have missed your last deadline – don’t panic. Contact HMRC as soon as you can, in these situations – regular, honest communication is key.
What should I do if I’m not sure whether I’ll be able to pay my VAT bill?
If you don’t think you’ll be able to pay before the deadline:
Contact Us – We can put in place a bespoke VAT funding facility in a matter of hours and pay HMRC directly on your behalf.
If you miss your deadline:
SME Loans can fund VAT loans retrospectively, i.e. after the deadline. However, it is also a good idea to contact the relevant HMRC department/office that sent you the letter explaining you have missed your deadline.
Contact: Self Assessment Payment Helpline – 0300 200 3822
In certain situations, HMRC allows businesses to set up payment plans to pay their VAT bill in instalments. The payment plans exist to help businesses that have poor cash flow and are struggling with payments. These payment plans increase the amount of time you have to pay your bill. When setting up your payment plan, you will need to have your password and Government Gateway User ID to hand.
Please be aware that if you don’t take these actions when it comes to paying your VAT bill, enforcement actions that HMRC can take as a way of collecting the tax you owe include:
- Collecting the owed money through your earnings or pension
- Involving debt collection agencies
- Taking things you own and selling them
- Removing the money from your bank account directly
- Taking you to court
- Closing down your business or declaring you bankrupt
Such repayment options are known as TTP (Time to Pay). It is important to note that whilst HMRC has been more lenient due to Covid, traditionally they will limit businesses to only 1 or 2 Time to Pay arrangements. Once this is used, a business would have no option but to use funding solutions at times when they do not have the cash-flow to support paying the quarters VAT in full.
VAT BILL LOANS FAQS
Frequently Asked Questions
If you still have unanswered questions about VAT bill loans, then make sure to check out our FAQs below for more information.
A VAT bill loan is essentially a loan which is used to help pay for the cost of the VAT bill which is required every three months. It’s used by businesses who cannot afford to pay for the VAT bill for that quarter, but do not want to get penalised by HMRC for failing to make payment.
With SME Loans, you can apply for a business loan to help pay for your VAT bill via our online application form. You’ll need to provide:
- How much you want to borrow.
- Basic information about the business.
- Basic personal details.
- Contact details.
If you are successful, an account manager will contact you to discuss your options and what is available to you.
There are many reasons why a business might not be able to pay its VAT bill. Sometimes, these causes are unexpected or occur during a quiet trading period. That’s why we work with regulated lenders who can offer short-term loans for businesses in need. In some cases, we could transfer money to your account within 48 hours.