BridgeGB FAQs
What constitutes a BridgeGB VAT Bridging Loan?
A BridgeGB VAT bridging loan is a short-term financing option that helps commercial property purchasers cover VAT obligations related to the transactions. These loans are designed to bridge the gap between the VAT that needs to be paid upfront and the eventual reimbursement from tax authorities (HMRC).
When is VAT chargeable on commercial properties?
The 20% VAT rate becomes chargeable on commercial properties where:
- The property has been elected for VAT.
- The owner has officially registered their interest in the property.
- The owner has completed VAT registration
These properties have “opted in” to be VAT chargeable. The seller of the commercial property can then issue a VAT qualifying invoice to the buyer for the property purchase. We lend on these “opted in” commercial properties or sites that will not be a transfer of a going concern. We do not lend on residential properties.
When might a commercial property developer use a VAT bridging loan?
A commercial property developer may decide to use a VAT bridging loan if they have a VAT obligation on the purchase of a commercial property which they do not want to cover with their own capital.
How much can a commercial property purchaser borrow?
Purchasers can borrow from £150,000 up to £5,000,000 and we will fund 100% of the VAT required.
What is the typical loan processing time?
For urgent cases, we can expedite the process within 5 business days, although more advance notice is preferred prior to the purchase.
How will the loan be secured?
We use our own VAT Agent and the VAT monies reclaimed from the HMRC are paid into the client account account of the VAT Agent.
Loaned funds are sent directly to the borrowers’ solicitors and not directly to the borrower, on the assurance from the solicitor that the use of all the funds loaned are to be paid specifically to meet the VAT commitment due to HMRC.
No further security is therefore required subject to:
● The use of our own appointed VAT Agent
● The VAT reclaimed from the HMRC is paid irrevocably to the client account of the VAT Agent
● There is an undertaking for the borrower in the loan agreement that the funds are to be repaid directly to the BridgeGB
● The company SPV used to purchase the commercial property is new/clean and unencumbered (other than the bank loan to purchase the commercial property).
Are there any upfront charges?
There are no fees for obtaining an illustration or a formal offer. However, if you decide to proceed with the loan, a loan arrangement fee will be applicable.
What expenses are associated with a VAT bridging loan?
Loan arrangement fee and a monthly charge. There are no legal or VAT agent fees.
If a purchaser already has funds reserved to cover the VAT payment, why should they consider bridging instead?
Many returning clients opt to preserve their own capital rather than having it tied up with HMRC. This enables them to seize other opportunities, expedite project commencement, or establish a contingency fund for any unforeseen expenses.
How is VAT reclaimed from HMRC?
As experts in VAT recovery, BridgeGB’s VAT Agent offers a fully managed, hands-off VAT loan solution. They oversee the VAT recovery directly from HMRC and handle all inquiries, leaving the purchaser free to concentrate on their business.
How can potential clients get an illustration?
To receive an illustration, our clients can simply get in touch with us here or email with the relevant property details. Our expert team will then provide you with an illustration within an hour.
VAT Exemption on Commercial Property
In general, the sale or lease of commercial property is exempt from VAT, providing relief for both purchasers and tenants. This exemption extends to various transactions involving commercial properties. Yet, while this may seem advantageous for purchasers, it means vendors or landlords can’t reclaim VAT on related costs. Exceptions arise for new properties or if the vendor opts to charge VAT, often after refurbishment or renovation to recoup associated VAT costs.
Option to Charge VAT
Commercial property owners have the option to charge VAT at the standard rate (currently 20%) when selling or leasing their property. This enables them to recover VAT on related costs but entails adherence to specific procedures and restrictions. Notifying HMRC of this decision within 30 days is crucial, preceding any exempt supplies made regarding the property. The decision typically lasts 20 years and is considered irrevocable, though subsequent buyers or tenants must decide whether to continue this arrangement based on their use of the building.
Transfer of Going Concern
If a property sold can function as a rental business and the buyer intends to continue such operations, it may qualify as a Transfer of Going Concern (TOGC). This falls outside VAT’s scope, sparing buyers from VAT payments. However, certain conditions must be met, including mirroring the seller’s VAT position by the transfer date.
VAT on the Sale of New Commercial Property
New commercial properties, less than three years old, are subject to VAT at the standard rate. Buyers intending to rent such properties often elect to charge VAT on rents and future sales to recover VAT incurred on acquisition, unless a TOGC applies.