How VAT invoicing on a commercial property can benefit your business

Purchasing commercial property can be a complex and daunting prospect, with many considerations. At Enness Commercial, our specialist team work hard to guide you successfully through this process and secure you the best possible financial product. We cater for a full range of loan sizes and clients, from first-time business owners to heavyweight commercial investors.

However, securing your loan isn’t the only thing you’ll need to think about. If you’re taking out a loan to purchase a commercial property, one thing this loan probably won’t cover is value added tax (VAT). When buying a ‘new’ (less than three years) commercial property, the purchase will attract VAT on the purchase price at the prevailing rate, which is currently 20%. If the commercial property is older than three years and if the current owner has opted to tax, standard rate VAT will also be applied to the purchase price.

Many borrowers neglect to consider how they will pay the VAT on their purchase. As a VAT registered company, you can claim back the 20% tax back eventually. However, 20% is a sizeable chunk of any budget to pay up front. For the purposes of cash flow and financial stability, it can be very limiting when commercial lenders will not include VAT in their loan calculation, leaving borrowers to fund the extra cost.

But this need not be a barrier to your plans. VAT invoicing- where you borrow the VAT amount upfront- can ease client liquidity and allow for smooth completion of your commercial project. Whether you’ve already submitted a commercial loan enquiry through us, or are looking to do this soon, we can help to arrange this for you.

Enness works with a trusted partner who can provide this service for you. Put simply: after we issue you with product information for your loan, this can be used to make a formal application to our partner for a VAT loan. Our partner will then incorporate the Special Purpose Vehicle (SPV) if not done so for your business already, and confirm to HMRC that they are the appointed VAT agent. Our partner will then arrange the rebate, and repay the loan from this.

If you have any further questions about VAT invoicing, please don’t hesitate to contact us.

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