Jonny Towers

Jonny Towers

VAT Funding Explained

VAT funding is an innovative financing model that enables you to tackle the challenges that making a large VAT payment on a commercial property purchase can create.

However, as a niche financing concept, many businesses can be in the dark about how they could take advantage of the substantial benefits it affords, such as delivering fast access to capital and reduced opportunity costs.

This handy guide has been designed to give you a clearer insight into how VAT funding can help you regain control of your short-term finances.


What is a BloomSmith VAT loan?

Our VAT loans allow you to raise short-term finance to cover the VAT element due on the purchase of a commercial property, land or a development.

This ensures that your deal completes without you having to plunge into your cash reserves or having to renegotiate with your senior lender.

Our funding model’s structure also means your loan will be repaid by HMRC on your behalf, saving you time and resources.


When is VAT chargeable on a commercial property?

VAT is chargeable on a commercial property when the owner is VAT registered, has registered their interest in the property and has elected to charge VAT on the sale. 

In such instances, the vendor has “opted in” to charging VAT on the commercial property and can issue the purchaser with a VAT qualifying invoice for the property purchase.

Can you reclaim the VAT on commercial property transactions from HMRC?

You can reclaim the VAT, but it must be paid first.

The reclaim takes place if HMRC approves the transaction after it has been submitted, following the property purchase. We manage this process for you as part of our service.

A successful reclaim typically takes between 45 to 120 days from the date of payment (purchase) until recovery.

This effects cash flow and can come at the cost of potential opportunities.

Our VAT loans enable you to focus on the next transaction, rather than allocating cash to HMRC.

What amount can you borrow under a VAT funding loan?

BloomSmith Finance can deliver loans ranging from £50,000 up to £10m.


Is it possible/normal to borrow 100% of the VAT charge?



Do BloomSmith take security on your property?



What security is required?

BloomSmith Finance lends on process, meaning we do not require security to proceed with your loan.

To sanction your loan, all we need is for you to form a new Special Purpose Vehicle outside of a group structure and verification of the VAT-charging seller’s legitimacy.

The loan is secured via recovery of the funds from HMRC, rather than on available equity in the property.


Is this normal in the market?

Other lenders require a second charge on the property as security for a loan, a BloomSmith Finance loan does not require this.

The decades of experience we have across the real estate and finance sectors has taught us that the better borrowers do not like to subsume their equity, and our model has therefore been designed to meet their needs.


Reclaiming the VAT from HMRC

We provide a fully managed option which means that we will directly oversee the recovery of the VAT from HMRC and deal with all enquiries.

Being experienced in dealing with the VAT recovery process can often speed up recovery, thereby reducing your interest payment costs by reducing the loan term.


What are the advantages of BloomSmith VAT provision?

It’s fast and there is a simple predictable process.

Our model also means your equity remains free for other deals and you’ll receive support to manage both your VAT purchase risk and your HMRC reclaim.


Get in touch

To hear more about our processes or enquire further, you can call us on 020 3488 3411 or fill out our enquiry form

You can also check if you qualify for a BloomSmith VAT bridging loan with our eligibility checker.

Neil Petty // Director // 07970740360
Nigel Smith // Director // 07770914594

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