VAT & Corporation Tax Loans
Finance your quarterly and annual business tax requirements with a business loan. Avoid late payment fines and ease the burden when it comes to paying VAT or corporation tax bills.
- Compare a wide range of lenders and rates
- Check your eligibility in minutes
- Find out how much you could borrow
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- What is a VAT loan?
- How does a VAT loan work?
- What are the benefits of using a VAT loan?
- How much does a VAT loan cost?
- Does my business qualify for VAT finance?
- What is a VAT bridging loan?
- Can VAT finance cover other corporation tax liabilities?
- What is a corporation tax loan?
- When do you pay corporation tax?
- When should I use a corporation tax loan?
- How can I get a corporation tax loan?
- Who can apply for a VAT loan?
- What happens if I can’t pay my VAT bill?
- Why choose Capalona to arrange your VAT finance?
Paying VAT and corporation tax is unavoidable, but it can cause major issues to your cash flow. Receiving an unexpected bill or finding you owe more than you anticipated, only adds to the pressure of running your own business.
With over 2.6 million private sector businesses registered for VAT, many business owners end up missing payment deadlines and incurring more costs in late payment charges, and these can escalate over time.
If you lack the working capital you need to meet your company tax and VAT liabilities, we can help with VAT finance. Whether you have missed your payment deadline or are due to pay your bill, a VAT loan or corporation tax finance solution will protect your cash flow and enable you to fulfil your legal obligations to HM Revenue and Customs.
What is a VAT loan?
A VAT loan is a form of finance that is used by businesses to pay quarterly VAT bills by the deadline. For companies that are struggling to meet their value added tax requirements, VAT loans provide a helpful alternative that allows for monthly payments to be made.
Many alternative finance providers understand the challenges associated with mounting VAT and tax bills. Even the most stable businesses can incur an unexpectedly large bill, especially if they have changed the way they trade or purchase goods during the previous year.
Financing VAT bills and tax returns enables you to manage your working capital effectively so you can continue to run your business with total peace of mind.
Loans to pay VAT bills
Getting a loan to pay a VAT bill is a viable way to fund your tax payments. Tax and VAT financing offers an efficient way to pay these bills and avoid costly penalties. You can then repay the finance in regular instalments, rather than in one lump sum. Finance options are available to accommodate a host of business needs.
Many business owners pay their VAT return to HMRC on a quarterly basis and, if you require an additional injection of cash to meet these payments, VAT financing is available. Planning ahead really helps to take the pressure off when your business has a host of other financial commitments to meet throughout the year.
If you are required to pay annual corporation tax, it is best practice to allocate enough funds throughout the year to cover the bill. However, this can be difficult for many UK businesses, and it is easy to get caught out.
If you find yourself in a position whereby you lack working capital or your bill is higher than expected, our range of funding options can help you meet this annual charge and repay a business loan over regular monthly instalments.
How does a VAT loan work?
VAT finance works by filling the gap when you lack the level of working capital required to meet your bills and legal obligations. A VAT loan facility enables you to meet your tax liabilities on time and spread the cost of these bills over regular instalments, all within a manageable timeframe.
Businesses are required to submit a VAT return every three months. If your business is running low in cash flow and you are worried about paying the quarterly bill, VAT finance can be used. When applying, you may qualify for an unsecured business loan, which does not require you to offer an asset as security against the loan.
Unsecured VAT loans are offered over the short term, suiting the three month accounting period set by HMRC. Depending on your personal circumstances and trading history, you could access a VAT loan from £1,000.
You may decide, however, to use a secured business loan whereby the repayment costs may be more favourable, but you have a property or other asset secured against the loan. Longer-term tax loans are available for up to five years, meaning you can spread out the repayments over a longer period.
What are the benefits of using a VAT loan?
The primary benefit of using a VAT loan is improved cash flow. By securing a VAT loan, businesses can ensure they pay their VAT on time, avoiding late payment penalties from HMRC. Additionally, VAT loans can provide a quick and flexible funding solution compared to traditional business loans. This can be particularly advantageous for businesses that need to make urgent VAT payments but may not have the liquidity at that moment.
- Pay tax bills on time - VAT finance, or tax finance as it is commonly referred to, allows you to pay your bills on time, clear any outstanding tax debt and control your cash flow throughout the year, without having to pay out a quarterly or annual lump sum.
- Rolling credit facility - In some cases, you can use the VAT funding as a rolling facility. This means instead of facing big bills at the time of your next VAT bill, you can spread the cost across a longer period of time, reducing the requirement to part with a ‘lump-sum’ when it comes to paying the HMRC.
- Avoid HMRC penalties and fines - Late payments can result in surcharges being issued. If you fail to pay your VAT bill by the due date, the surcharge for the first default is 2% of the outstanding tax. VAT loans alleviate delayed payments and keep what you’re required to pay at a minimum.
- Improve company cash flow - A VAT loan reduces the total amount due into more manageable monthly chunks. This can help you better control your cash flow which in turn will result in business growth and success.
How much does a VAT loan cost?
The cost of your VAT loan will depend on your individual business requirements. When the lender reviews your application, they will determine whether it is a low risk or a high-risk deal, which will influence the total amount you will need to pay.
If your business is in sound financial shape, then the lender may issue you with competitively priced rates with no additional security required. If, on the other hand, your business has poor credit, you may still qualify for a VAT loan. However, the interest rates will be higher, and you may need to offer additional security against the borrowing.
In some cases, the lender may also need a personal guarantee. A personal guarantee agrees that in the event of defaulting on the VAT finance, you could be personally liable to repay the loan and even lose personal assets.
Make sure that when you are applying for a VAT loan, you understand fully the liability you face if you were to fail to repay the loan.
Can a tax loan be used to cover 100% of a VAT bill?
Yes, it is possible for a VAT facility loan to cover 100% of a VAT bill. Alternatively, you can use the tax funding as a cash injection to help you repay your full tax liability to the HMRC.
Does my business qualify for VAT finance?
To qualify for a VAT loan, your business must be registered in the UK and have a trading history of at least twelve months.
What will be required by the lender?
Each business’s tax circumstances are unique. Because of this, VAT loans are tailored to suit individual needs. In order to help the decision process and speed up your application to make it easy for each party, you should prepare the following documents:
- VAT return
- Business bank account statements
- Company accounts
- Plus any information about the directors of the business
Once your chosen tax finance lender has seen this information together with your completed application, you could receive tax funding in as little as 24 hours.
What is a VAT bridging loan?
A VAT bridging loan helps property developers raise finance over a short term to cover any VAT element that could be due on the purchase of a commercial property. Sometimes such property purchases can have complex tax implications, and VAT could be an additional liability. A VAT bridging loan can provide property developers with the finance they need to complete on a commercial deal.
Can VAT finance cover other corporation tax liabilities?
Yes, VAT finance can be used to meet all tax requirements and liabilities, including the following types of business tax:
- VAT
- Corporation tax
- Income tax (for sole traders)
- National insurance
- Partnership tax
Is it just a loan to pay a tax bill in the UK?
Yes, the tax loan is used to pay tax liabilities in the UK only.
What is a corporation tax loan?
A corporation tax loan operates similarly to a VAT loan. It is used to help pay your business’s annual corporation tax. Instead of paying one lump sum, corporation tax loans spread the total tax cost into smaller, fixed monthly instalments.
When do you pay corporation tax?
Corporation tax is required to be paid before you file your company tax return. Unlike other taxes, the corporation tax deadline will depend on your business’s accounting period.
The deadline to pay corporation tax is nine months and one day following the end of your accounting period for the previous financial year.
Be advised that some payment methods take longer than others to reach HMRC. You can pay corporation tax online or via telephone transfer. You should factor in the time your chosen method takes to ensure your corporation tax is paid by the deadline.
- Same day payment: online and telephone banking, CHAPS
- 3 working days: Bacs, direct debit (if previously set up), corporate credit card, bank or building society
- 5 working days: direct debit (if not previously set up)
When should I use a corporation tax loan?
Your corporation tax bill will typically get paid in one instalment. For some businesses, paying one large corporation tax payment can put a strain on cash flow, particularly if it's been a tough year and the company is struggling financially.
A corporation tax loan will allow you to spread your corporation tax payments over a longer period of time, usually between 6 - 12 months. It is a good option for businesses that want to improve their working capital and reduce the risk of fines and charges for late or non-payment.
Alternatively, if you are unsure about taking out a corporation tax loan, you can contact HMRC to see if you are eligible to set up a payment plan (Time to Pay arrangement TTP).
How can I get a corporation tax loan?
There are a number of online lenders who offer corporation tax finance to small businesses in the UK. These alternative finance providers are able to provide unsecured and secured funding that can spread the cost of HMRC’s payments over time.
If you’re considering corporation tax finance for your business, why not complete our short online application form. After that, our online matching platform will automatically find the right VAT finance lenders for your business.
How quickly can I finance a tax bill?
The application process takes just a few minutes. Depending on the lender you choose, the decision process can be just a couple of hours, and in some cases, the funding can be with you in as little as 24 hours.
Who can apply for a VAT loan?
Any VAT-registered business can apply for a VAT loan. This includes small and medium-sized enterprises in various sectors. The lender will assess the business's financial health, including its cash flow and ability to repay the loan. It's essential for the business to have a clear understanding of its VAT liabilities and how much it needs to borrow to cover the VAT payment.
What happens if I can’t pay my VAT bill?
If you think your business will struggle to pay VAT on time, you should contact the HMRC as soon as possible to arrange an alternative repayment option. As mentioned, if you fail to pay your tax bill, you can incur penalties.
If you can’t pay your VAT bill, a VAT loan could be an option for you to bring immediate working capital into your business to help pay your tax.
Why choose Capalona to arrange your VAT finance?
For businesses, ensuring tax payments are made by the deadline is extremely important. Continued late payment of business taxes will result in accrued interest charges and eventually, a petition for compulsory closure.
Here at Capalona, as one of the largest business finance brokers, we work with a wide range of lenders that specialise in providing VAT finance and corporation tax loans. Because of this, we can help your business find and secure the right business funding well before HMRC’s payments are due.
- Authorised and regulated by the Financial Conduct Authority (FCA)
- Free to use, we don’t charge any fees for our service
- Compare and access a range of reputable VAT loan providers
- Members of the National Association of Commercial Finance Brokers (NACFB)
About the author
Adrian T
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Amazingly fast, efficient service, minimal paperwork. So much faster than my business bank of twelve years.
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