VAT bridging for conveyancing-focused practices: pros, cons, and timeframes

Quick summary: VAT bridging loans are short‑term finance to cover VAT due on property work or disbursements before completion funds arrive. They preserve cashflow and prevent HMRC penalties but carry cost, security and timing risks. Read on for clear examples, typical timeframes, eligibility, practical tips and how to get a free eligibility check and tailored lender matches from UK Business Loans.

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Why VAT bridging matters for conveyancers

Conveyancing teams often face a tight, predictable cashflow squeeze: VAT is payable to HMRC at set points but completion funds from a sale, mortgage advance or client come at or after completion. Where the firm must meet VAT liabilities (for example, on disbursements, purchase VAT, or certain services) before client monies are received, that gap can force firms to delay payments, use working capital or risk HMRC penalties.

Here’s what you’ll learn: what VAT bridging is, when it helps, the main benefits and risks, typical lender response times, and how to get matched to specialist lenders quickly.

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What is VAT bridging?

A VAT bridging loan is a short‑term facility designed to cover VAT liabilities arising before completion funds arrive. It is ordinarily repaid from completion proceeds, client funds received on completion, or from other anticipated receipts tied to the transaction.

Common situations where VAT bridging is used by conveyancers:

• VAT due on disbursements or building works incurred prior to completion.
• VAT on property purchase invoices where the purchaser pays VAT before the lender releases mortgage funds.
• When a firm is due to reclaim VAT but the refund timing is uncertain and HMRC deadlines require payment.

VAT bridging differs from invoice finance or longer‑term loans in that it is specifically short term (days to a few months) and sized to cover an immediate VAT liability rather than ongoing working capital needs.

How VAT bridging works — mechanics & example

Mechanically, a VAT bridging loan is usually:

• Applied for with evidence of the upcoming completion (e.g. exchange/completion statements, client instructions, mortgage offer).
• Approved on the basis of imminent receipts and the firm’s banking and compliance records.
• Advanced to the firm (or sometimes paid directly to HMRC) and repaid on completion from sale proceeds or client funds.

Step‑by‑step example

1. Firm receives an invoice including VAT of £24,000 arising on a property purchase.
2. Completion is scheduled in 10 working days but the firm must pay VAT immediately to avoid penalties.
3. The firm requests a VAT bridging facility of £24,000 from a specialist lender via an introducer or broker.
4. Lender reviews evidence (completion statement, mortgage offer) and agrees a short-term loan.
5. Funds advanced; firm pays HMRC. On completion, the sale proceeds repay the bridging loan plus fees and interest.

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Pros — why conveyancing practices choose VAT bridging

• Immediate cashflow cover: Meet HMRC deadlines and avoid late penalties or interest.
• Keep completions on schedule: Prevent delays that can damage client relationships and cause chain breakdowns.
• Preserve working capital: Avoid using cash reserves that are needed for payroll and overheads.
• Speed: Short‑term bridging is often faster than reorganising longer‑term finance or waiting for refunds.

Real-world: a mid‑sized conveyancing firm used a VAT bridge of £35,000 to cover urgent VAT on a portfolio purchase; completion proceeded and the loan was repaid from sale funds within two weeks, avoiding a costly delay to multiple transactions.

Cons & risks — what to watch for

VAT bridging is effective, but not without trade‑offs:

Cost

• Interest and arrangement fees can be materially higher than standard business loans because facilities are short term and time-sensitive. Typical lender ranges (illustrative only): interest 0.8%–2.5% per month (roughly 10–30% APR equivalent depending on term), arrangement fees 0.5%–2.5%.
• Additional legal or documentation fees may apply.

Security & covenants

• Lenders may require a charge over completion proceeds, a General Security Agreement or personal guarantees.
• If completion falls through, the firm must repay the facility — this is a material timing and credit risk.

Regulatory & client‑money considerations

• Solicitors must handle client money in accordance with SRA rules. Using bridging finance must not result in improper use of client funds or a breach of client account obligations.
• Ensure your practice’s PI insurer and accountant are informed where facilities interact with client money flows.

Timing & completion failure

• If a completion is delayed or cancelled the lender’s position may change and they can require immediate repayment. Understand failure‑of‑completion clauses in any facility agreement.

Note: cost ranges above are typical lender ranges and are illustrative only—actual terms depend on lender, security, firm profile and transaction details.

Typical timeframes (enquiry to funds)

Faster decisions are common where the lender can rely on clear exchange/completion evidence and an established banking relationship. Complex security or extensive KYC will extend timelines.

Eligibility, documentation & typical costs

Typical eligibility criteria

• Limited company practice with established accounts and bank transaction history.
• Clear evidence of an impending completion (exchange/completion statements, mortgage offer, client authority).
• Professional indemnity insurance in place and compliant client money procedures.
• Minimum loan sizes commonly from £10,000 upwards.

Documentation checklist

• Completion statement or exchange/completion email.
• Practice accounts and recent bank statements.
• ID and KYC for principals (as required by lender).
• Details of client account handling and any client authorisations where funds pass through client accounts.

Typical costs (illustrative only)

• Arrangement fee: 0.5%–2.5% of facility.
• Interest: 0.8%–2.5% per month (or equivalent daily rate).
• Legal/documentation fees: variable; some lenders include in arrangement fee.

Practical tips for conveyancing practices

• Plan VAT timing into your pipeline: flag transactions where VAT will fall due before completion.
• Prepare a standard documentation pack: completion statements, mortgage offers and client authorisations to speed lender decisions.
• Ask lenders about completion‑failure provisions: negotiate the actions and timeframe if repayment becomes necessary.
• Keep compliant records: ensure any movement of client funds remains fully SRA‑compliant and transparent to auditors.
• Compare options: sometimes a short overdraft, a conditional completion facility, or delaying non‑urgent disbursement payments may be cheaper — get quotes.

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Alternatives to VAT bridging

If VAT bridging is not suitable, consider:

• Short‑term business overdraft or working capital loan (may be cheaper for ongoing needs).
• Invoice finance (if you have billable invoices) to unlock cash tied up in fees.
• Arranging conditional completion funding with the buying client’s lender where possible.
• Internal measures: staging payments, negotiating extended VAT payment schedules with suppliers where feasible.

How UK Business Loans helps

We do not lend. UK Business Loans connects conveyancing practices to specialist lenders and brokers who understand solicitor VAT timing and completion workflows. Complete a short enquiry (practice name, loan amount, expected completion date and contact details) and we will match you with partners likely to offer suitable terms.

For further reading on finance solutions for legal firms visit our solicitors business loans resource: solicitors business loans.

Expected response time: typically within hours during business days; formal offers depend on lender due diligence.

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Frequently asked questions

What exactly is a VAT bridging loan for solicitors?

It is a short‑term loan to cover VAT liabilities arising before completion funds are available. The facility is usually repaid on completion from sale proceeds or client funds.

How long do VAT bridging loans last?

Most are short term: from a week up to around 90 days. Terms depend on the lender and the expected completion date.

Will using a bridging loan affect my professional indemnity insurance or SRA obligations?

Using a bridging loan does not necessarily affect PI cover, but you should check policy terms and ensure all client money handling complies with SRA rules. Notify your insurer or accountant where appropriate.

What happens if a completion falls through?

If completion fails you remain liable for the loan. Lenders will seek repayment under the facility terms; ask potential lenders for clear completion‑failure clauses and remedies before agreeing.

How much does VAT bridging usually cost?

Costs vary. Illustrative ranges: arrangement fees 0.5%–2.5%; interest often 0.8%–2.5% per month. Exact prices depend on lender, term, security and firm profile.

Can small or recently established practices access VAT bridging?

Possibly, but many lenders prefer established firms with clear completion evidence and a minimum loan size (commonly from £10,000). We can match you to lenders who consider a range of practice sizes.

Summary & next steps

VAT bridging is a practical tool for conveyancing‑focused practices to meet VAT obligations and keep completions moving — but it comes with costs, security demands and timing risks. Prepare clear completion evidence, check client money rules, and obtain multiple quotes so you can compare fees and terms.

Get a Free Eligibility Check & tailored lender matches — quick, no obligation. We introduce you to lenders and brokers who can provide quotes and next steps.

1. What is a VAT bridging loan for conveyancers?
A VAT bridging loan is a short-term facility that covers VAT liabilities arising before completion funds are available and is typically repaid from completion proceeds or client funds.

2. How quickly can I get VAT bridging funds for a conveyancing completion?
Initial eligibility checks are often done within hours and lenders commonly make decisions and advance funds within 24–72 hours depending on documentation and security required.

3. How much does VAT bridging usually cost (interest and fees)?
Typical illustrative costs are arrangement fees of about 0.5%–2.5% and interest around 0.8%–2.5% per month, with exact pricing depending on lender, term, security and firm profile.

4. Who is eligible for a VAT bridging loan for solicitors and conveyancing firms?
Lenders generally prefer established practices with recent accounts and bank history, clear completion evidence, compliant PI insurance and client money procedures, and minimum facilities commonly start around £10,000.

5. What security and covenants do VAT bridging lenders typically require?
Lenders often take a charge over completion proceeds or the completion account, require debtor instructions, a General Security Agreement or personal guarantees depending on facility size and risk.

6. Will using a VAT bridging loan affect my SRA obligations or professional indemnity insurance?
Using a VAT bridge does not automatically breach SRA rules or PI cover, but you must ensure client money is handled compliantly and inform your insurer or accountant where facilities interact with client accounts.

7. What happens if a completion falls through while I have a VAT bridging facility?
If completion fails you remain liable for the loan and lenders can require immediate repayment under the facility terms, so always review completion‑failure provisions before borrowing.

8. What documents do I need to apply for VAT bridging for a conveyancing transaction?
Typical documentation includes a completion or exchange statement (or mortgage offer), recent practice accounts and bank statements, ID/KYC for principals, PI evidence and any client authorisations relating to funds flows.

9. Are there cheaper alternatives to VAT bridging for conveyancing practices?
Alternatives include short‑term overdrafts or working capital loans, invoice finance for billable fees, conditional completion funding via the buyer’s lender, or negotiating staged supplier payments.

10. Does submitting an enquiry to UK Business Loans affect my credit score and is it an application?
No — the free enquiry is not a loan application, it won’t affect your credit score, and UK Business Loans acts only as an introducer to match you with specialist lenders and brokers who will perform checks if you proceed.