Using Bridging Finance to Pay Off Tax

Being hit by an unexpected tax bill is never an enjoyable experience. Businesses, investors, and property developers may find themselves facing tax obligations at a time they didn’t expect. Irrespective of the nature and extent of the bill, settling tax liabilities as quickly as possible is essential in order to avoid serious legal consequences.

When time is a factor, bridging finance can be the perfect solution to settling tax obligations in a quick, convenient, and cost-effective way.

Expecting the unexpected

Most tax bills are completely predictable and can be budgeted for. Businesses and investors are therefore expected to conduct their financial affairs responsibly in order to ensure their ability to meet their tax obligations when required.

Nevertheless, there are various instances where even the most responsible organisations and individuals encounter demanding and difficult situations. For example, anyone inheriting an estate with a value in excess of £325,000 will need to pay inheritance tax. Capital gains tax is also payable when selling capital assets, such as properties.

One of the most common instances where specialist types of bridging loans are used to cover tax payments is when a commercial property is purchased. When a business or an investor buys a commercial property, they are liable for an additional VAT payment of 20%. This could amount to tens of thousands of pounds on top of the purchase price of the property, alongside all other fees and outgoings.

Companies that are VAT-registered can reclaim this money, but not until the current VAT accounting period comes to an end. This means waiting up to three months for the VAT refund, during which the buyer must contend with a significant shortfall.

If it is likely that this 20% VAT payment would have negative implications for the buyer, they could take out a short-term bridging loan to augment it. After which, the balance on the loan could be repaid in full (plus a small interest fee) when the VAT is returned, ensuring their cash flow isn’t adversely affected for the duration.

Bridging loan eligibility

The potential benefits and applications of bridging finance are limitless. Establishing eligibility for a bridging loan can be surprisingly simple, starting with a bridging loan calculator to get an idea of the available options.

Bridging finance can be secured against almost any type of property, with no specific limitations on how much can be borrowed. In addition, a bridging loan can often be accessed within 2 to 5 working days, making it the ideal option for covering urgent outgoings and unexpected bills.

Even with an imperfect credit history, there is still every chance you will qualify for a bridging loan if you can provide security to cover the balance in full.

For more information on the benefits of using bridging finance to pay urgent and unexpected tax bills, book your obligation-free consultation today with a member of the team.