VAT Loan Interest Rate
In this white paper, we explore how much the VAT loan interest rates are compared to a bank overdraft facility.
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 that make it different from other forms of funding:
- The loan principle is paid directly to HMRC (in most instances)
- 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 and 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 be made as follows, with the first payment being in March:
5th March 1/3
5th April 1/3
5th May 1/3
This is different and slightly more expensive than making the repayments on a 1+2 basis, first payment being in February, i.e.
5th February 1/3
5th March 1/3
5th April 1/3
As you can see, 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|
Online VAT Calculator
Often with an online VAT loan calculator, you need to enter your name, number, email address and then someone gets back to you. WestWon do not do this. You can put in the amount of VAT needed to be paid and our VAT loan calculator will work out the repayment for you there and then. We do not know who you are, unless you contact us – which we hope you do!
Just simply CLICK HERE, and this will take you to the VAT Loan calculator page. This enables you to get a quick quote and provides you with the opportunity to send through an enquiry form.
Alternatively, if you are looking for a VAT loan and wish to speak to us instantly, please call us on 01494 611 456 or email firstname.lastname@example.org. Carl specialises in providing a range of loans and would welcome your call and in answering any questions you may have.