Benefits of tax bill funding
Key benefits of tax bill funding include:
- Pay HMRC on time and in full
- Spread the cost over manageable monthly payments
- Keep working capital in the business
- Quick to arrange, often without security
Corporation Tax, VAT and self-assessment liabilities arrive on a fixed timetable, but they rarely arrive at a convenient moment. Funding the bill keeps cash in the business for stock, wages and growth plans while the liability is settled on time.
Facilities can usually be arranged within a few days, so they remain an option even when a payment deadline is close.
What is tax bill funding?
Tax bill funding is a short-term business loan used to settle a tax liability, with the cost then repaid in fixed monthly instalments. It is most commonly used for Corporation Tax and VAT, and many businesses also use it for self-assessment liabilities.
The funds are typically paid either directly to HMRC or to your business account shortly before the payment is due. Because the liability is settled on time, the business avoids late payment interest and penalties.
Many businesses set up VAT funding as a rolling arrangement, with each quarterly return funded over the following three months. Corporation Tax facilities are usually spread over six to twelve months.
Tax bill funding is often unsecured, which means it can sit alongside existing borrowing without affecting other facilities. Where larger liabilities are involved, secured options may also be considered.
How does tax bill funding work?
A tax bill funding lender will typically assess a facility as follows:
- Loan amount: Usually the full value of the tax liability, though part-funding is also possible where you would prefer to pay some of the bill from cash.
- Eligibility: Lenders will consider your trading history, recent accounts and affordability. A reasonable trading record makes most established businesses eligible.
- Loan term: VAT facilities are typically repaid over 3 months to match the quarterly cycle, while Corporation Tax facilities commonly run from 6 to 12 months.
- Repayment: Fixed monthly payments across the term. Many businesses renew the arrangement each quarter or year so that tax payments become a predictable monthly cost rather than a lump sum.
