VAT bill due, no cash: emergency VAT funding options
By Oliver Mackman · Reviewed 2026-04-26
Quarterly VAT bill is due in days. The cash isn't there. Standard sources (overdraft, retained profit) aren't sufficient.
What this is
VAT is collected from customers and held in trust for HMRC. Quarterly returns are filed and paid within 5 weeks of the period end. Failure to pay triggers default surcharge (2% to 15% depending on history) and, after persistent default, winding-up action.
What happens if you do nothing
Default surcharge first (one quarter's grace, then percentage penalties). Repeated default can move you onto monthly returns and remove the cash-accounting scheme privilege. Eventually, winding-up action.
Options, in order
- VAT loan, specialist lenders fund the bill against next-quarter cashflow. Decision in 24-72 hours typical.
- Time to Pay arrangement with HMRC if cashflow recovery is genuinely on the horizon.
- Working-capital loan from iwoca, Funding Circle or similar, typically priced higher than VAT loans but more flexible on use of funds.
- Invoice finance against unpaid customer invoices, handled via MarketInvoice (sister site).
Which UK lenders engage
- · Specialist VAT-loan lenders (panel routes to these).
- · iwoca flexi-loan for non-asset-backed working capital.
- · Just Cashflow revolving facility for repeat-VAT borrowers.
- · YouLend / Liberis for businesses with strong card-flow.
HMRC-specific notes
File the return on time even if you can't pay. Late filing is a separate offence from late payment. Call HMRC the day the return is filed if you cannot pay. The Business Payment Support Service line is the right contact.
Do not do this
- · Spend VAT collected from customers on operations. It is held in trust and the personal liability for directors extends if it has been used elsewhere.
- · File a nil return when activity occurred. That is a fraud risk.
- · Wait for the surcharge before acting, surcharge percentages escalate quickly.
When to call an advisor before borrowing
Call your accountant before borrowing if VAT defaults span more than two quarters, if combined VAT and other HMRC debts exceed £50,000, or if cash has been used out of trust.
Related
- · All HMRC pressure scenarios
- · Our post-decline routing (if mainstream lenders have declined)
- · After a decline: alternative lenders
Editorial only. We are not an FCA-authorised adviser or licensed insolvency practitioner. For active enforcement action, contact a licensed insolvency practitioner directly.