Does HMRC know I am using a tax funding facility?

No — HMRC is paid in full and on time by the lender. The funding arrangement is between the business and the lender, not HMRC. HMRC receives payment as normal and has no involvement in the finance arrangement.

How much can be funded?

VAT and tax funding amounts typically match the HMRC demand — from £10,000 to several million pounds in some cases. The amount available depends on the business's financial profile and the lender's criteria.

What are the typical repayment terms?

Repayment terms for VAT funding facilities typically range from 3 to 12 months. Some lenders offer up to 24 months for larger corporation tax demands. Repayments are usually structured as fixed monthly instalments.

When should I apply for VAT funding?

Ideally before the HMRC payment date, allowing the lender time to set up the facility and pay HMRC on your behalf. However, some lenders may be able to assist after a VAT payment has been missed — this should be discussed as a matter of urgency. NexGen Finance can help identify available options.

Is VAT funding available to all businesses?

VAT and tax funding is available to most VAT-registered trading businesses. Lender criteria varies, but most providers consider the business's trading history, financial performance and credit profile when assessing applications.

Does NexGen Finance provide VAT funding directly?

NexGen Finance is not a lender. We help businesses understand VAT and tax funding options and, where suitable, progress enquiries with appropriate specialist finance partners. All facilities are subject to lender approval.

VAT and Tax Funding UK — NexGen Finance

What Is VAT and Tax Funding?

VAT and tax funding is a specialist finance product that allows a business to spread the cost of an HMRC VAT demand or corporation tax bill across monthly repayments, rather than paying the full amount at once. The lender pays HMRC directly and in full — so the VAT or tax obligation is settled on time — and the business repays the lender over the agreed term.

For businesses that generate strong revenue but experience cashflow pressure around quarterly VAT payment dates or annual tax bills, this type of facility can be a practical tool for protecting working capital without disrupting operations.

How It Works

✓ Business receives an HMRC VAT or corporation tax demand
✓ Business applies to a specialist tax funding lender (via NexGen Finance)
✓ Lender pays HMRC in full on or before the due date
✓ Business repays the lender in fixed monthly instalments
✓ HMRC has no involvement in the finance arrangement

What Can Be Funded?

✓ Quarterly VAT returns (standard and annual VAT accounting)
✓ Corporation tax demands
✓ PAYE and National Insurance liabilities (in some cases)
✓ Inland Revenue demands where specialist lenders apply

Typical Amounts and Terms

✓ Amount: Typically matches the HMRC demand — from £10,000 upwards
✓ VAT funding: Usually repaid over 3 – 6 months
✓ Corporation tax funding: Typically 6 – 12 months, some lenders up to 24 months
✓ Repayments: Fixed monthly instalments

Who Is It Suitable For?

✓ VAT-registered businesses facing a significant quarterly VAT bill
✓ Businesses with a corporation tax demand due
✓ Businesses that are profitable but asset-light or cashflow-constrained
✓ Businesses seeking to protect working capital during tax payment periods
✓ Businesses that have already been using VAT funding regularly as a cashflow tool

Advantages and Considerations

Potential Advantages

✓ HMRC paid on time — no late payment penalties
✓ Working capital preserved for trading
✓ Fixed monthly repayments easy to budget
✓ HMRC has no involvement in the arrangement

Key Considerations

✓ Interest charged on the facility adds to the overall cost of the tax bill
✓ Facility must be repaid before the next VAT quarter in most cases
✓ Not a substitute for addressing underlying cashflow issues
✓ Subject to lender approval and credit assessment

Example Use Cases

Protecting Cashflow Around VAT Quarter End

A services business with £85,000 in quarterly VAT due uses a 3-month VAT funding facility to spread the payment, maintaining working capital for wages and supplier payments while HMRC is paid in full by the lender.

Corporation Tax on a Strong Trading Year

A limited company with a significant corporation tax demand following a profitable trading year uses a 12-month tax funding facility to spread the cost, rather than drawing a large cash reserve from the business at a point when capital is needed for growth.

Seasonal Business VAT Management

A hospitality or events business with seasonal income uses VAT funding to manage its tax obligations through quieter months, repaying the facility as revenue returns during peak trading.

Frequently Asked Questions

Does HMRC know I'm using a VAT funding facility?

No — HMRC is simply paid the amount due on time, as normal. The finance arrangement is between the business and the lender. HMRC has no involvement or knowledge of how the payment was funded.

What happens if I miss a VAT payment without funding in place?

Missing a VAT payment can result in HMRC surcharges, penalties and interest. If a business is struggling to meet a VAT demand, it should seek advice promptly. NexGen Finance may be able to help explore funding options — even where a payment has already been missed — though this is subject to lender appetite and should be treated urgently.

When should I apply?

Ideally before the HMRC payment due date, so the lender has time to process and pay HMRC on time. Applications should typically be submitted at least 5–10 working days before the due date. Earlier application is always preferable.

Can I fund both VAT and corporation tax in the same year?

Yes — VAT funding and corporation tax funding are separate products and can be used concurrently or sequentially. The availability and terms of each will depend on the lender's assessment of the business at the time of application.

Is VAT funding secured or unsecured?

VAT funding is typically arranged on an unsecured basis, with approval based on the business's trading profile and credit history. Some lenders may require a personal guarantee from directors.

NexGen Finance is not a lender and does not provide regulated financial advice. Suitable enquiries may be referred to commercial finance broker partners. Funding is subject to status, affordability, lender criteria and approval.

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VAT and Tax Funding