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Financing Your VAT


In theory, paying your periodic VAT to HMRC should be easy. It should also be largely self-financing and therefore not a problem in terms of finding the cash.

However, managing business finance is rarely so straightforward in reality. That’s why, from time to time, you might benefit from assistance with your VAT finance.

Paying VAT

There might be many reasons why you are finding it difficult to pay the required sums on time.

Perhaps you have:

  • encountered unexpected cash flow problems because one of your large customers has simply not paid their bills;
  • perhaps you have been forced to pay a large and entirely unexpected invoice for something that you had not planned for;
  • possibly you simply made an error in your calculations and suddenly realise that the amount of tax you need to pay is considerably higher than you had thought.

Whatever the reason, if you are facing a shortfall, you will need to do something about it. You may have two options open to you:

  • discuss a “time to pay” special agreement with HMRC;
  • consider taking out a VAT finance loan of one sort or another.

Asking HMRC for help

Some businesses fail to understand just how wide-ranging the powers of HMRC are.

That arises largely from the historical link to Customs and Excise but those authorities remain potent today. For example, HMRC can seize your goods within a short time period in order to recover debt.

The first message here is clear. Do not take your debts to HMRC lightly or simply ignore them. The charges, penalties and potential consequences of legal action can all be severe.

It is true that in certain limited circumstances, you may be able to ask HMRC for an agreement to delay your VAT payment. It is important to recognise though that this is not an automatic right but a privilege that must be justified.

The exact process is difficult to describe as it may vary from one office to another and one set of circumstances to another. Broadly speaking though:

  • you will need to explain the reason why you are unable to make your payment;
  • HMRC may then investigate the current financial status of your company in order to form their own view of your position and justification;
  • typically, they may not approve such requests in circumstances where you are making a business decision not to pay (e.g. where you have decided to spend money on other optional things such as investments, projects and so on);
  • they may agree a repayment schedule with you in circumstances where it is clear that your company does not have the cash and has no way of realistically finding it. Typically they will not drive a company into closure by demanding immediate VAT repayment – but your company must be judged by them to be viable. Their decision might also be influenced by many other factors, such as whether or not you have been late in paying before.

Interest and charges might typically apply.

Using VAT finance

You may find it more convenient and less stressful to simply investigate VAT finance advances which would essentially make cost-effective funds available to you so that you could meet your VAT bill on time.

Here at ACF Direct, we have a number of potential ways that we may be able to help you to raise the finance necessary to meet your commitments to HMRC. Such VAT loans are typically a 3-4 month term and do not require security.

Typically the processes involved are straightforward and can be quickly applied in order to reach a decision in principle on your application.

Why not contact us for an initial informal discussion of our services in this area?