Auction purchases

Combining Auction Finance and VAT Funding

PropertyVAT Team · Updated 21 October 2026 · 3 min read

An auction purchase with VAT needs two funding lines arriving on the same day, from different lenders, assessed on different criteria, with different exits. Coordinating them inside a 28-day window is the real work.

What each facility does

They are genuinely separate products. The senior lender is lending against a building; the VAT lender is lending against a tax refund.

Why one facility usually will not stretch

The obvious question is why not simply borrow more on the bridge.

Most bridging lenders calculate their advance against the property's value. VAT is not part of that value — it is a recoverable tax. So many will not lend against it at all.

Where a lender will stretch, the consequences are:

• A higher loan-to-value on the same asset
• Potential repricing of the whole facility, not just the extra
• A longer-term debt funding a one-to-three-month need
• Early repayment considerations when the refund arrives

Borrowing for 12 months to cover a liability that clears in 8 weeks is the structural mismatch.

The consent question

This is the single biggest scheduling risk, and it is binary.

If the VAT facility is unsecured against the property, there is no charge, no consent needed, and no interaction between the lenders beyond coordinating the completion date.

If it takes a second charge, your senior lender must consent. Senior facilities almost always restrict further charges. Obtaining consent means going to the senior lender's credit team and waiting.

On a 28-day completion, that process can consume the entire window — and raising it late can unsettle a senior lender who did not know the deal involved VAT.

This is why unsecured VAT facilities dominate at auction. The pricing premium is usually smaller than the cost of missing completion.

Sequencing the two

Before the auction

• Legal pack reviewed; VAT position confirmed
• Buying entity VAT registered
• Senior bridge agreed in principle
• VAT facility agreed in principle
• Decide secured or unsecured, and if secured, open the consent conversation

Days 1–3 after the hammer

• Instruct your solicitor; pay the deposit
• Formally instruct both lenders with the same completion date
• Confirm the solicitor acts for both drawdowns

Days 4–20

• Senior lender's valuation and credit process
• VAT facility documentation
• Second charge consent, if applicable
• Chase the VAT registration if still outstanding

Days 21–27

• Completion statement, including SDLT on the VAT-inclusive figure
• Confirm net advances from both lenders — fees are often deducted
• Confirm cleared funds with your solicitor

Day 28

• Draw both facilities
• Complete
• Obtain the seller's VAT invoice on the day

The net advance trap

Check what each lender is actually sending, not the facility headline.

Where arrangement fees or retained interest are deducted at source, the figure arriving is lower than the facility amount. On a VAT facility this matters acutely: if £300,000 of VAT is due and the lender retains interest from a £300,000 facility, you are short on completion day.

Ask both lenders for the net figure in writing, and add them up against the completion statement.

What to tell each lender

Tell them about each other, early.

• The senior lender should know a VAT facility exists, and whether a second charge is sought
• The VAT lender should know the senior terms and the completion date
• Both need your solicitor's details and the same date

The failures here are rarely credit failures. They are coordination failures — two lenders ready on different days, or a consent that arrived the week after completion was due.

This guide is general information, not financial advice. Structures and criteria vary by lender — confirm requirements for your specific transaction.