HMRC VAT Financing For Solicitors
This year in the UK,10,400 firms of solicitor’s will bill circa £50bn in fees and collect £10bn in VAT for HMRC. This is expected to grow to £53bn in 2025 and over £60bn in 2027. Even after taking into account input VAT, that is a massive amount of VAT paid to HMRC.
Whilst there may be mutterings that your finance teams are unpaid tax collectors, paying HMRC every quarter can sometimes be challenging. The more successful you are, the greater your billings, the more your quarterly VAT bill is. Added to this is the issue of work in progress. Your unbilled work does not attract VAT, but the wages and other associated business costs still have to be met very month.
Solicitors in the main are very diligent about paying their HMRC VAT bills on time every quarter. This is one of the reasons why VAT financing for solicitors is so popular.
So what is HMRC VAT financing and how does it work?
It is actually a very simple loan product that has been around for many years. Let’s take an example of a legal practice with a £50,000.00 VAT bill due on the 7th of November 2024.
Go onto our free VAT loan calculator on the VAT Loan page of our website. Put in £50,000.00 as your VAT bill. It will calculate exactly what the monthly repayment will be over three months, in this case, £17,618.33 per month, giving a total to be repaid of £52,855.00. We do not ask for your company name, we do not track your IP address, this is completely confidential.
Assuming you would like to proceed, we carry out a credit check and communicate back normally within 48 hours with a credit acceptance. A simple e-signature document is sent to you for signing. Our funder will pay HMRC on or before the 7th November using your VAT number as a reference. You then make three monthly repayments starting on the 7th December. Once the final payment has been paid on the 7th February that is the end.
Using the example above, can we just fund some of the VAT bill?
Yes, we can fund from £10,000.00 and you settle the difference. Our funder would look for confirmation you have paid the balance between the VAT bill and the loan.
What information is needed?
Last three months bank statements, latest full set our company accounts if you are filing abridged accounts at Companies House. Directors’ details and a copy of the VAT bill. Management accounts may be needed.
It is now after the 7th November 2024, can you still fund the VAT?
Yes, up to 14 days after your VAT period end. We cannot fund historic VAT.
I have paid the VAT but would like the cash back as working capital, can this be done?
Yes, some firms of solicitors prefer to pay their VAT bill and then take out a loan. As long as this is done within a couple of weeks of HMRC being paid, this can normally be achieved, subject to credit.
Do many legal firms fund VAT?
Absolutely. Historically, the VAT loan product was just developed for professions such as solicitors and accountants. Now our customers cover not just legal firms but most sectors of businesses.
Are personal guarantees required?
Often they are but this does depend on the size of your practice.
Please note, all loans are subject to credit, personal and or cross company guarantees may be needed.
