VAT bridging finance

Secured vs Unsecured VAT Bridging

PropertyVAT Team · Updated 21 October 2026 · 3 min read

The security structure is the first question a VAT lender will settle, and it has more practical consequences than the rate.

The two structures

Secured. The lender takes a charge over the property, usually a second charge behind your senior lender. The reclaim is still the expected repayment route, but there is recourse to the asset.

Unsecured against the property. The lender underwrites the HMRC reclaim alone. There is no charge on the title, so the senior lender's position is untouched.

"Unsecured" overstates it slightly. The lender will still want protections — solicitor undertakings, control over the account the refund is paid into, and sometimes guarantees at entity level. What it means is no charge over the property.

How they compare

The consent problem

This is the practical issue that decides most cases.

Senior facilities typically prohibit further charges without consent. Getting that consent means approaching your senior lender, explaining the VAT facility, and waiting for their credit team. On a 28-day auction completion, that process can comfortably consume the whole window.

Worse, raising it late can unsettle a senior lender who had not been told the deal involved VAT at all. If you are going down the secured route, tell them at the outset.

When each makes sense

Choose unsecured when:

• You are buying at auction with a fixed, short completion
• Your senior lender is slow, or consent is uncertain
• The deal is already tight on time
• You want the senior relationship left undisturbed
• The VAT amount is modest relative to the overall funding

Choose secured when:

• The VAT is large and the pricing difference is material
• Your senior lender consents readily, or there is no senior debt
• The reclaim is less straightforward — a first-time SPV with a large claim
• You have time in the transaction to run the consent process

The pricing difference in context

An unsecured facility usually carries a premium, because the lender's only real recourse is a tax refund. But measure that premium against the term, not against an annual rate.

On £300,000 over 60 days, a difference of 0.005% per day is £15 a day — around £900 over the facility. Set that against the cost of missing an auction completion, and the calculation usually resolves itself.

Where the VAT is £1m and the term is three months, the same arithmetic points the other way.

What lenders look at either way

The security structure changes the recourse, not the underwriting question. Both structures turn on:

• Is the buying entity VAT registered?
• Is the VAT genuinely recoverable?
• How quickly will HMRC repay?
• Is the VAT position evidenced in the contract?

A weak answer to any of those will not be rescued by offering a charge over the property. The exit is still the reclaim.

This guide is general information, not financial advice. Structures and availability vary by lender and case.