VAT Deferral Finance

Our VAT funding solutions are designed to remove any barriers for your business, allowing you to acquire the assets you need without depleting your working capital.

  • Quick decisions and finance application turnaround

  • Expertise in many specialist sectors

We believe that all UK businesses have unique needs when it comes to accessing finance.

VAT Deferral Finance Solutions

At STAR Asset Finance, we believe that every UK business needs something different when it comes to accessing funds. One of the most common hurdles when securing finance for cars, vans, equipment, or machinery under hire purchase terms is the requirement to pay the full VAT amount upfront.

VAT Finance vs VAT Deferral Explained

It is easy to get lost in financial jargon, but understanding these terms is key to choosing the right product for your business:

  • VAT Deferral: This specifically refers to delaying the payment of VAT on an asset purchase. At STAR, we can defer VAT payments for up to three months from the date your agreement begins.
  • VAT Finance and VAT Funding: These are broader terms for a VAT deferral loan or facility used to cover the cost of VAT, either for asset purchases or to spread the cost of quarterly VAT liabilities.
  • VAT Bridging Finance: This acts as a short-term “bridge,” providing the funds to cover the VAT until your refund is received from HMRC.

How VAT Deferral Finance Works

The VAT deferral process is straightforward and designed to align with your tax recovery cycle.

  1. Agreement Setup: When you arrange finance for a new asset, we calculate the VAT due.
  2. The Deferral: Instead of paying the VAT upfront, STAR provides a VAT deferral finance facility.
  3. HMRC Claim: You submit your VAT claim to HMRC as usual.
  4. Repayment: You normally have up to three months to receive your refund from HMRC and use those funds to settle the VAT portion of the finance.

Common Reasons Businesses Use VAT Funding

VAT bridging finance is a strategic tool used by thousands of SMEs across the UK. Here are a few real-world scenarios where it adds value:

  • The Growth Phase: A construction firm needs three new vans to fulfill a contract. Paying the VAT upfront on all three would exhaust their cash reserves needed for materials. VAT funding keeps the cash in the bank while the vans get to work.
  • Large-Scale Machinery: For manufacturers investing in high-value plant machinery, the VAT can reach six figures. A VAT deferral loan ensures that capital isn’t sitting idle with HMRC for months.
  • Seasonal Fluctuations: Businesses in sectors like hospitality or agriculture may use VAT finance during off-peak months to guarantee they can still invest in equipment without impacting their day-to-day liquidity.

Who VAT Deferral Finance Is For

Whether you are a sole trader, a partnership, or a limited company, if you are VAT-registered and investing in business assets, our VAT funding solutions are for you. We have extensive expertise in many specialist sectors, providing quick decisions and rapid application turnarounds to keep your business moving.

FAQs About VAT Finance

It is a short-term finance facility that allows businesses to delay the upfront VAT payment on an asset purchase, usually for up to three months, to match their HMRC rebate cycle.

STAR covers the VAT cost at the point of purchase. You then pay the VAT back to us once you have received your refund from HMRC, usually 90 days later.

It is ideal whenever an upfront VAT payment puts pressure on your cash flow or when you would prefer to keep your cash reserves available for other operational costs.

Yes. Beyond asset purchases, we can provide VAT funding to help spread the cost of your regular quarterly VAT liabilities into manageable monthly instalments.

No. You are still responsible for filing your returns correctly. Finance is simply a way to manage the cash flow associated with the payment; it does not change your tax obligations to HMRC.

We pride ourselves on quick decisions. In many cases, we can approve your VAT funding alongside your primary asset finance agreement.

Other products you may be interested in

We offer a range of business financing solutions to meet the needs of various industries. Backed with decades of banking and finance experience, our team works with thousands of companies throughout the UK. We help them optimise cashflow and achieve their goals through a range of business finance solutions, including:

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Cashflow Finance

Need a cash flow injection to seize that golden opportunity? We have got you covered. Our flexible financing options are crafted to align payments seamlessly with your business cycles, ensuring that you have the liquidity you need precisely when needed.

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Contract Hire

Contract hire is a cost-effective business finance service for companies that require support with vehicle leasing. Offering the use of new cars or commercial vehicles without the headaches of ownership, this business financing option is a great way to manage your fleet without the risks of depreciation.

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Hire Purchase

Hire purchase is popular amongst businesses and individuals. The customer chooses their supplier directly and negotiates the asset’s price and specifications.

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Invoice Finance

Invoice finance is a way for your business to borrow money against the amounts due from customers. This allows you to receive most of the cash from your invoice value as soon as your invoice is raised.