VAT Loan Interest Rate
What is a HMRC VAT loan?
A HMRC VAT loan is a specific form of financing for a VAT bill. There are a few key elements to a VAT Loan Interest Rate and a VAT loan that make it different from other forms of funding:
The loan principle is paid directly to HMRC (in the majority of cases)
The loan is short term, normally three months
Why would a UK company apply for a VAT loan?
UK companies use VAT loans when they know they have a VAT bill to pay on a specific date. Also when they wish to spread the expense over the following three months. There are many positive reasons why a company would do this. Interestingly, most companies who need a VAT loan are doing well. Often VAT loans are needed when there is a miss-match between purchase and sales invoices or clients have not paid. Asking for a VAT loan by no means indicates there is any financial danger to the company.
How are the repayments made to the VAT funder?
Nearly all of the VAT loans we write are on what we call a 0+3 repayment basis. No deposit followed by three monthly payments.
Example: If we pay HMRC on the 5th February for the VAT period October through to the end of December, the loan repayments would have the first payment being in March.
This is different and slightly more expensive than making the repayments on a 1+2 basis, first payment being in February.
Using a 1+2 monthly repayment structure means you are only borrowing 2/3 of the VAT bill and making the final payment one month earlier.
Always be careful when comparing VAT loans and what interest you are paying, it maybe you are not comparing like with like.
What is the VAT loan interest?
Lets look at two examples of a £10,000 and £100,000 VAT loan.
In summary, we work on a 0+3 monthly loan repayment basis. Secondly, the larger the loan, the cheaper the interest rate.
VAT Bill Monthly Repayment Total Repayment Monthly Interest
£10,000.00 £3,616.67 £10,850.00 £283.34
£100,000 £35,416.67 £106,250.00 £2,083.34
Contact Us
For more information on VAT Loan Interest Rate or for a free no obligation quote, please give a member of the VAT Loans team a call on 01494 956 871 or email us on [email protected].
