VAT & Corporation Tax Funding

What it is

A short-term facility that settles your VAT or corporation tax bill, which you then repay over an agreed number of months. HMRC is paid on time and in full. You repay the funder instead.

It exists because tax bills don't arrive when it suits the business. They arrive on a date set by the calendar, often in the same quarter as a large stock order or a quiet trading period, and they've to be paid whether the money is there or not.

What people use it for

A quarterly VAT bill landing the same week as a payroll run. A corporation tax bill falling due in the month a large customer moved to longer payment terms. A business that has had a strong year, owes tax on those profits, and has already put that money back into stock and staff.

The pattern is nearly always the same. The business is profitable and solvent. The cash is simply somewhere else at the moment the bill falls due, and paying it in one go would mean pulling money out of something that's working.

It also comes up as an alternative to a time to pay arrangement with HMRC. That's a route worth knowing about, and we'll mention it, because it's sometimes the better answer.

What can be funded

Liabilities rather than assets.

• Quarterly VAT
• Corporation tax
• Self assessment liabilities for directors, with some funders
• PAYE and National Insurance, depending on the funder
• Historic liabilities where an arrangement is already in place

Terms are short by design, usually months rather than years, because the facility bridges a timing gap rather than funding a purchase. What it isn't is a way of reducing what's owed. The bill stays the same. What changes is when it leaves your account.

How it works

The mechanics are simple, which is part of the appeal.

You tell us the amount of the bill and the date it falls due. We take that to the funders who work in this space. If it goes ahead, the funder settles the bill directly with HMRC, usually on or before the deadline. You then repay the funder across the agreed term.

Because the money goes straight to HMRC, there's no question of it being spent on something else. Funders tend to view that differently from general working capital, and the assessment is usually quicker as a result.

Terms commonly run over several months for VAT and can run longer for corporation tax, though this varies by funder and by the size of the bill.

You'll want the bill or the calculation to hand. The more notice you give, the more options there are. A facility arranged a fortnight before the deadline is a calmer process than one arranged the day before.

You still owe the money

This changes the timing, not the liability. The bill is paid, but you now owe a funder instead of HMRC, with a cost on top. It buys breathing room. It doesn't reduce what the year cost you.

Talk to HMRC as well

A time to pay arrangement is sometimes cheaper than funding, particularly on smaller amounts. It carries its own consequences and it isn't always granted. But it's worth knowing both options exist before committing to one, and we'll say so rather than let you assume funding is the only route.

If it happens every quarter, something else is wrong

Funding one bill through a difficult quarter is sensible. Funding every bill, every quarter, usually means the underlying cash cycle needs attention rather than repeated short-term cover. That's a conversation worth having.

Will HMRC know I have used funding?

HMRC receives payment in full and on time, so from their side the bill is simply settled. The arrangement is between you and the funder. It doesn't show as an arrangement with HMRC and it isn't the same thing as a time to pay agreement.

How quickly can it be arranged?

Often within a few days for a straightforward case, because the amount is already known and the payment goes directly to HMRC. Leaving it until the day before the deadline narrows the options considerably, so it's worth starting as soon as you know the figure.

Can I fund a bill that's already overdue?

Sometimes, though it depends how overdue it's and whether HMRC has begun recovery action. It's harder and there are fewer funders willing to look at it. If you're approaching that point, raise it early rather than waiting.

Does it affect my credit position?

It's a credit facility, so it's assessed like one and it forms part of your overall borrowing picture. Whether that matters depends on what else you're planning. If you expect to apply for other funding soon, mention it and we'll factor it in.

Can I fund PAYE as well?

Some funders will and some won't, and it often depends on whether the liability is current or in arrears. It's worth asking rather than assuming. Tell us the full picture of what's owed and we'll tell you what's realistic.