For brokers

A Broker's Guide to VAT Bridging

PropertyVAT Team · Updated 20 October 2026 · 3 min read

For most brokers, VAT is the issue that arrives late and threatens a deal that was otherwise done. It rarely kills the lending. It kills the timetable.

Handled early, it is an administrative step and a straightforward additional fee. Handled late, it is a client who cannot complete.

When VAT becomes your problem

VAT at 20% is payable at completion where the seller has opted to tax, or where the building is new. On a £1.5m purchase that is £300,000 the client has to find on the day — on top of the deposit, the fees and the stamp duty.

Clients routinely budget for none of it, because they assume commercial property is VAT exempt. Usually it is. But not on the deals most likely to reach you, because opted property clusters at the better-quality, recently refurbished end of the market.

The three questions that de-risk a case

Ask these at first contact, before anything is packaged:

1. "Has the seller opted to tax?" If the client does not know, that is an answer in itself — it means nobody has checked.
2. "Is the buying entity VAT registered today?" Not "will be", not "we're doing it". Today.
3. "Is this intended as a TOGC, and what happens if it fails?"

Ninety seconds of questions. They reliably surface the problem while there is still time to solve it.

Why cases stall

Almost never on credit. Almost always on timing:

Every one of these is visible weeks ahead if someone asks. None is fixable in the final week.

How a VAT bridge fits the structure

The important point for your case: it does not compete with the senior facility.

• The senior lender funds the purchase price.
• The VAT facility funds the VAT only.
• The VAT facility is repaid from the HMRC reclaim, not from a property exit.

Because the exit is a tax refund rather than a sale or refinance, underwriting focuses on the certainty of the reclaim. Some lenders secure against the HMRC recovery alone, leaving the title and the senior LTV untouched. Where a second charge is taken, you will need the senior lender's consent, so flag it early.

What to send with a case

Package it once, properly:

• Purchase contract or auction legal pack showing the VAT position
• Evidence of the option to tax, including HMRC acknowledgement where available
• Buyer entity details, including whether it is a newly formed SPV
• VAT registration number, and recent returns if there is a filing history
• Completion date and solicitor's details
• The senior facility's terms, where a second charge may be needed

A first-time SPV with no filing history is fundable. It is also the profile most likely to attract an HMRC check before repayment, so build headroom into the facility term rather than assuming the fastest case.

Where the value is for you

Three things, in the order clients notice them:

• Completions that would otherwise slip. A deal that completes is a deal that pays.
• Differentiation. Most brokers do not raise VAT until it is a problem. Raising it first signals that you have done this before.
• Repeat business. Clients remember who stopped them losing a deposit.

The broker who asks about VAT at the first meeting looks considerably more capable than the one who discovers it at completion — and keeps considerably more of their pipeline.

This guide is general information, not tax or financial advice. VAT treatment is specific to each transaction and clients should take their own VAT advice.