VAT Loans for Construction Companies
By Joshua Giles, Founder and Director · Reviewed by the CoreFi credit team
Last updated 20 July 2026
CoreFi is a broker, not a lender. We do not set rates and lenders make all credit decisions.
In short: £10k - £300k over 3 - 9 months. Construction has a VAT problem that other sectors do not: the domestic reverse charge.
Construction has a VAT problem that other sectors do not: the domestic reverse charge. Under the DRC, subcontractors no longer charge VAT to the main contractor on most CIS supplies, which means the net VAT position on a project can look very different from the invoices going out the door. You may be collecting less output VAT than you expect, while still owing HMRC on your overheads, plant hire, and materials. The quarterly bill arrives regardless, and HMRC's deadline does not move because your retention has not been released.
A VAT loan is a short-term facility, typically three to nine months, drawn specifically to pay the HMRC liability. The lender pays HMRC directly or reimburses the payment, and you repay in monthly instalments over the term. There is no charge on your assets and no cross-contamination with your project float. This suits principal contractors in the £2m to £15m annual turnover range, where a single quarter's VAT can run to six figures and would otherwise drain working capital at the worst point in a project cycle.
The lender who says yes to this is usually a specialist working capital funder, not a high-street bank. Banks read a quarterly VAT demand as a sign of cash flow stress; the specialist lenders see it for what it is, a timing mismatch on a trading business. Approval turns on your VAT returns, three to six months of bank statements, and your overall trading position. We are a broker, not a lender, so we cannot promise a rate or an approval, the lender decides both. For a well-run construction business, indicative costs tend to sit in the 1.5% to 3% range over the term.
Key Benefits
- The reverse charge creates a net VAT position that catches out even experienced contractors. We work through how it affects your actual liability before we approach any lender.
- HMRC deadlines are fixed. We aim to have funds in place before the payment date, not after, so you are not paying surcharges on top of the loan cost.
- Project cash stays in the project. A VAT loan sits outside your working capital facility, so your subcontractor payments and materials budget are not touched.
- CIS registration, DRC exposure, and retention-heavy cash flows are normal for us. You do not need to explain the industry to get a sensible conversation.
Frequently Asked Questions
How does the domestic reverse charge affect what I actually owe HMRC?
Under the DRC, subcontractors drop VAT off their invoices to you as main contractor, so you are not collecting that output VAT. But you are still paying input VAT on materials, plant, and overheads, and depending on your mix, your net liability can be higher than the headline project value suggests. A VAT loan covers whatever the return shows you owe. It does not matter whether the liability arises from standard-rated supplies or the overhead side of a DRC project.
Can CIS-registered businesses get a VAT loan?
Yes. CIS status does not affect eligibility. Lenders assess the VAT liability itself and your trading history, typically three to six months of bank statements and your last two or three VAT returns. A CIS deduction certificate is not relevant to this product.
What if my project payment is delayed and I cannot cover the repayments?
This is worth discussing before you take the loan, not after. If your payment cycle is genuinely uncertain, some lenders will allow a grace period or a slightly extended term. Be upfront about your debtor position; lenders who know the sector expect retention and payment delays. Hiding it and then missing an instalment is worse.
Is this available to sole trader builders?
Yes, sole traders and partnerships can apply, though the lender pool is smaller than for limited companies. You will need to be VAT-registered with a consistent trading history. If your turnover is close to the registration threshold, lenders will want to see that the VAT registration is established and your returns are filed on time.
Related Funding Options
VAT Loans UK: Spread Your Quarterly VAT Bill
A VAT loan pays HMRC on your behalf and you repay in monthly instalments over 3 to 9 months. We place VAT loans from £5k to £500k for UK limited companies.
Business Loans UK
Business loans for UK limited companies from £5k to £500k+, unsecured or secured, repaid over 1 to 6 years. We place these across a wide lender panel. No fee to search.
Bridging Loans for Construction Companies
Short-term bridging finance for UK construction companies. Secure land, cover retention gaps, and move on sites before the high street bank has issued a decision in principle.
Business finance by location
Lender appetite varies by city and region. If you would rather start from where your business is based, these local guides cover the same funding with the local picture.
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Get matched with lendersCoreFi is a trading name of JG Core Ltd (Company #16218779, England & Wales). CoreFi acts as a commercial finance broker and does not provide regulated financial advice. All products described are unregulated business-to-business finance. Information on this page is for general guidance only and does not constitute a formal offer of finance. Terms, rates, and availability are subject to lender criteria and may change without notice.