Mortgage guide
What is VAT bridging?
Election for VAT: Property owners may opt to charge VAT, enabling them to reclaim VAT on property-related expenses. This requires notifying HMRC within 30 days before making any exempt supplies.
- Published
- 13 Apr 2026
- Last reviewed
- 8 Oct 2026
- Reading time
- 3 min
What is VAT bridging?
At Mortgage Lane, we offer specialised guidance on VAT bridging, a crucial financial tool for managing VAT on properties and land elected for VAT, including new freehold commercial properties less than three years old. VAT bridging becomes necessary when reclaiming VAT from HMRC, a process that can take up to six months.
Understanding VAT Bridging and Its Necessity
Election for VAT: Property owners may opt to charge VAT, enabling them to reclaim VAT on property-related expenses. This requires notifying HMRC within 30 days before making any exempt supplies.
Transfer of Going Concern (TOGC): If a property is being purchased as a TOGC, VAT is not payable.
VAT Bridging Loan vs. Cash Advance
VAT Bridging Loan: This is generally more suitable for funding VAT on property transactions. It’s specifically tailored to accommodate the time it takes to recoup VAT from HMRC.
Cash Advance: Known as a ‘merchant cash advance’, this is a short-term borrowing option used for business purposes, including VAT. However, it differs from a VAT bridging loan in terms and suitability for VAT financing.
How Mortgage Lane Can Assist with VAT Bridging
Loan Repayment Advice: We provide advice on how to spread loan repayments over an affordable term, ensuring financial viability.
Connecting with Lenders: Our expertise in VAT bridging enables us to connect you with suitable lenders, ensuring you have the right financial support for your VAT obligations.
At Mortgage Lane, we understand the complexities of VAT in property transactions and offer tailored VAT bridging solutions. Whether you’re dealing with reclaiming VAT or making informed decisions about VAT charges on your property, our team is here to guide you through the process and connect you with the right lending solutions.
Bridging calculator
Bridging Loan Criteria
These wider product criteria provide context for this guide. The lender will assess your individual case.
| Criteria | Detail |
|---|---|
| Borrowers | Personal, limited company (Ltd co), LLP and offshore trusts, depending on the lender |
| Repayment type | Interest only or repayment |
| Term | Short term. The maximum term varies by lender; in our experience the minimum term is usually 1 month, and 3 months with some lenders |
| Experience | Not always required; it depends on the lender and the exit |
| Max applicants | Varies by lender |
| Valuation types | Automated valuation (AVM), Market Value 1 (MV1) yield based, market value (MV), 180-day or 90-day value, depending on the lender and how it labels the valuation basis |
| Regulated and unregulated | Yes, both: regulated where the borrower or a close family member lives, or will live, in the property |
| Credit searched | Usually, depending on the lender |
| Credit scored | Varies by lender; the decision rests mainly on the property and the exit |
Published indicative terms for the wider product category are shown for context. They are not a quote for the specific circumstances discussed in this guide.
| Loan to value | Rate |
|---|---|
| 65% LTV | 0.62% per month (2% lender fee) |
| 75% LTV | 0.72% per month (2% lender fee) |
| 85% LTV | 0.9% per month (2% lender fee) |
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Frequently asked questions
Are VAT bridging Loans regulated?
It is important to note that VAT bridging loans are not covered by the Financial Services Compensation Scheme, unless they intend to reside in the property, so auction loan investment borrowers should ensure they are dealing with a reputable lender.
What Loan to Value is a VAT bridging loan?
At Mortgage Lane, we are able to arrange VAT bridging loans typically up to 100% Loan to Value (LTV) of the VAT portion, often without requiring additional security. We collaborate with lenders who are comfortable securing the loan against the anticipated HMRC VAT recovery.
Where do you broker VAT bridging Loans in the UK?
We assist our clients with VAT bridging loans in England, Wales, Scotland, and Northern Ireland.
Why choose Mortgage Lane VAT bridging loans?
Mortgage Lane VAT bridging loans offer competitive rates, fast decision-making, and personalised service, whether you’re buying land, a commercial unit, or developing property.
What is the VAT bridging legal process?
Arranging a VAT bridging loan involves a specific legal process to ensure compliance and security for both the borrower and the lender. Here’s a breakdown of the process and the approach to interest charges in VAT bridging:
Application and Approval: The initial step involves applying for a VAT bridging loan, where the borrower provides necessary financial details. Lenders assess these details, focusing on the borrower’s creditworthiness and the likelihood of VAT recovery from HMRC.
Legal Documentation: Once approved, legal documentation is drafted. This includes the VAT bridging loan agreement, detailing terms like interest rates and repayment schedules.
Securing the Loan: If the VAT bridging loan requires collateral, such as a second legal charge on property, this is arranged and legally documented to guarantee the loan Interest Rates on VAT Bridging Loans: Interest is usually charged from the date of fund disbursement until full repayment. The rates can be fixed or variable, depending on the lender and loan terms.
Funds Disbursement: After legal formalities, the VAT bridging loan amount is released to the borrower for VAT payment on their property purchase.
Reclaiming VAT and Repaying the Loan: The borrower then reclaims the VAT from HMRC. Following the VAT recovery, the loan, along with accrued interest, is repaid to the lender.
Finalising the Process: The legal closure of the loan involves releasing any security on the property and closing the loan account once repayment is complete.
In VAT bridging, this legal process is crucial for protecting the interests of all parties involved. Mortgage Lane assists clients through every stage of securing a VAT bridging loan, ensuring a clear understanding of the interest implications and compliance with legal requirements.
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- Call our team
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