Bridging loans can be used to pay tax bills

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Most businesses have to pay tax. Every quarter, there is a VAT bill and there is an annual tax bill based on the profits the business makes. If a business struggles to pay a tax bill, a bridging loan can help.

There can be several reasons why a business cannot pay a tax bill. The yearly tax bill is based on profits made in the last tax year, but not every business sets money aside for the expected tax bill. To grow, businesses invest their profits in marketing and product development and can run out of money to pay tax.

Ask for an extension

You can ask HM Revenue and Customs (HMRC) for an extension to pay your tax bill later. HMRC has a list of circumstances when they will grant an extension, but any extension is discretionary and there is no guarantee that a business will receive an extension when they ask for one. If HMRC believes that you can pay now, it will ask for the payment, and penalise the business if it does not arrive on time.

Bridging finance can help

If a business cannot pay a tax bill but knows that within a few months the funds will be available, a bridging loan can provide the funds to pay the tax bill.

A lender will normally require an asset to be used as security for the loan. This will normally be in the form of property. If the business does not own the property outright and has a commercial mortgage, as long as there is enough equity in the property to cover the loan amount, it can be used as security. Lenders may consider other business assets as security.

A business needs to convince the bridging finance lender that they know how and when they will be able to repay the loan. Sometimes a business intends to take out a more long-term loan or remortgage their property. It can take a few weeks for the funds to be released on a long-term loan. Thankfully, a bridging loan is quicker to arrange than a long-term loan, so can be used to pay the tax, then the loan can be repaid once long-term finance is available.

A business may have low cash flow due to a large number of unpaid invoices. A bridging loan can be used to pay the tax bill and provide breathing space for the business to chase up outstanding debts.


Building developers invest large amounts of money to build houses or upgrade existing property. They are reliant on selling the property to make a profit, so if they have to pay a large tax bill, they may not have enough funds for this. Bridging loans can be secured on the present value of the development, then repaid as soon as the project is finished and property starts to sell.

If you think that bridging finance could be a solution for your outstanding tax bill, talk to Ascot Mortgages about arranging a bridging loan for your business.

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