Tax and VAT funding helps a business pay a tax bill now and spread the cost over time. Instead of paying all the money to HMRC at once, a lender pays it first and the business pays the lender back each month.

How it works

• Paying HMRC: The lender pays your tax bill to HMRC for you.

• Paying it back: You pay the lender back in smaller monthly amounts.

• How long it lasts: VAT loans are often short, usually about 3 months. Corporation Tax or Self Assessment loans may last 6 to 12 months.

Why businesses use it

• Helps cash flow: It can stop a big tax bill from using up all your business cash at once.

• Avoids late charges: It can help HMRC get paid on time, so you may avoid extra charges for paying late.

• Easier to plan: You swap one big bill for smaller monthly payments that are easier to manage.

Things to keep in mind

• It costs more: You will usually pay interest and fees, so the total cost is more than paying HMRC straight away.

• It adds debt: This is another bill for the business, so it can be harder to manage if money coming in changes.

• You may not qualify: The lender will check your business first. Some lenders want a business that has been trading for a while or makes a certain amount of money.

Another option: HMRC Time to Pay

Before using a lender, a business that cannot pay its tax bill may be able to ask HMRC for a Time to Pay plan. If HMRC agrees, you can pay the tax in smaller amounts over time.