Mixed-use property VAT bridging loans

A recent forum at the Finance Professionals Show identified mixed-use property acquisitions as the boom area in the commercial mortgages sector.

While this presents exciting opportunities for investors, VAT on a mixed-use property sale requires careful consideration and can leave many purchasers blindsided if they’re not careful.

Here, our team walks you through what to expect when it comes to paying VAT on a mixed-use purchase.

VAT challenges with mixed-use properties

VAT on a mixed-use purchase becomes relevant should the seller elect the property to be taxed.

With residential property transactions exempt from VAT, the total sale price must be apportioned between the residential and commercial components to determine the appropriate VAT that will be charged.

This process should reflect a fair and reasonable division of the property’s value, based on the market value of the residential and commercial areas of the property.

Solving the VAT problem

When purchasing a mixed-use property, the VAT payable on the commercial portion can pose a significant upfront cost for buyers.

Our VAT loans offer several advantages for commercial property purchasers facing this challenge.

We provide rapid access to funds, in as little as 48 hours of contract completion, enabling timely conclusions of transactions without depleting cash reserves.

Our lending model also means we don’t require a second legal charge on the property, simplifying the borrowing process and preserving your equity.

Mixed-use VAT bridging in action

In April 2024 BloomSmith were tasked with providing a VAT bridging loan for a pub purchase in Hertfordshire.

Despite VAT being leveraged on the property, the top floors of the pub were allocated as residential property.

£1,395,000 of the £1,550,000 price was attributed as being eligible for VAT, leaving the purchaser with a £279,000 obligation to finance.

Our team was able to provide them with a 60-day loan with a competitive monthly interest rate, enabling them to manage their cash flow while they waited for their VAT to be returned.

We’re here to help

Check your eligibility today or speak to our team about your whether our lending provision is right for you.