How Can VAT Loans Help Your Business?
You can apply for [VAT Finance] if you can't pay your VAT on time, so you don't incur late payments penalties.
Using VAT Loans to Pay Your VAT Bill
You can apply for [VAT Finance] if you can't pay your VAT on time, so you don't incur late payments penalties.
The HMRC, which is responsible for collecting taxes, charges businesses up to 15% of the total value of the VAT bill for any late or non-payment instances.
This cost alone can increase your accounts payable, in addition to any current expenses your company is already liable for.
It is common for companies to fall behind with VAT payments for a range of reasons
- When your business is experiencing a shortfall in cash flow due to seasonal trading.
- When odd payroll periods cause your company to lose money. This typically happens during holidays such as Christmas, and employers need to pay their employees earlier than the regular pay date.
- When you are waiting on unpaid invoices. This situation can negatively affect your business' financial stability.
With VAT Finance, you can avoid these potential challenges. VAT Finance can serve as a solution to pay your VAT bills on time while you're still managing your expenditure.
Benefits of VAT Finance
- VAT loans help in spreading the cost of your VAT bill while regulating your cash flow. In return, your company can get back on track and focus on its growth.
- VAT loans assist borrowers by providing a cash flow injection, which will help increase their spending ability.
- Paying your bill on time stops you incurring late payment penalties of up to 15% of your VAT bill.
Loans allow you manage your cash flow more effectively and use existing funds in other areas of your organisation instead of using it to pay for hefty late payment penalties.
There are VAT lenders that can approve your loan application in as little as 24 hours, which is perfect for a time-sensitive matter.
If you are already past your due date, you can still find facilities that can finance your VAT bill up to 14 days after the payment due date.
Managing VAT payments
Although taking up a VAT loan is an enormous help in paying off your bill, it's still important to save up and include VAT payments in your company budget. A VAT loan may enable you to pay your VAT bill, but keep in mind that you are still obliged to pay off the loan. It can be challenging to regulate your cash flow when you have many bills to pay.
Frequently Asked Questions
What happens if you can't afford your VAT bill?
If you are unable to pay your VAT bill you are at risk of incurring late payment penalties of up to 15% of the total amount you owe. In some cases you may be able to arrange a [Time to Pay] (TTP) agreement.
TTP is not available to everyone. It is only possible if you can prove you do not have the required funds to pay your bill when it is due or would have difficulty securing other finance, such as a [VAT loan].
It can be easier to arrange a TTP before the bill due date. So the more notice you give HMRC that you are unable to pay your bill the better.
TTP is not available to companies where a bill is a result of an enquiry or [compliance check].
TTP will;
- Incur interest
- Take longer to pay your bill
- Increase the total cost of the bill
- Effect cashflow
Can you negotiate VAT payments with HMRC?
It is possible to negotiate payments, however in recent years this has become increasingly difficult.
Many companies benefit from employing specialist services when negotiating with the HMRC due to the complex channels of communication and procedures that must be followed.
Making mistakes or not following the proper channels can have a negative effect on the success of your negotiations and result in HMRC demanding payments in full.
Can you delay a VAT payment?
If you delay paying your VAT bill or submitting your VAT return you will incur penalties and may enter into a 12 month surcharge period.
You will not have to pay a surcharge if you submit a late VAT return, BUT:
- Pay your VAT in full by the deadline
- Have no VAT to pay
- Are due a VAT repayment
What is the penalty for paying VAT late?
| Defaults within 12 months | Surcharge if annual turnover < £150,000 | Surcharge if annual turnover > £150,000 |
| 2nd | No surcharge | 2% (no surcharge if this is less than £400) |
| 3rd | 2% (no surcharge if this is less than £400) | 5% (no surcharge if this is less than £400) |
| 4th | 5% (no surcharge if this is less than £400) | 10% or £30 (whichever is more) |
| 5th | 10% or £30 (whichever is more) | 15% or £30 (whichever is more) |
| 6 or more | 15% or £30 (whichever is more) | 15% or £30 (whichever is more) |
Who can borrow money to pay VAT bills?
Being able to borrow money to fund your VAT and tax bills is subject to a number of things. However the most common factors are credit status, any existing credit agreements and how long you have been trading. This information allows lenders to establish if you are able to afford the loan.
Loan Affordability is determined by;
- Finance Facility Type
- Funding Amount
- Total Facility Cost
- Financial status
- Applicant(s) personal credit history
- Existing loan agreements