Can funding cover VAT on equipment purchases?

Yes. With hire purchase, many lenders offer a short VAT deferral or a separate VAT loan so you can reclaim VAT before repaying it. With finance leases, VAT is charged on each rental instead of upfront, easing cashflow.

Can funding include VAT on fit-out or refurbishment invoices?

Yes. Facilities can be structured to include VAT on stage payments to contractors. Some businesses also use a dedicated VAT loan to bridge to their VAT return.

What if my business is not VAT-registered?

If you are not VAT-registered you cannot reclaim VAT, but many lenders can finance the gross cost including VAT, subject to affordability and policy.

What documents do lenders need to fund VAT on projects?

Expect to provide supplier quotes or contracts showing VAT, a project timeline and stage payment schedule, recent accounts and bank statements, and evidence of VAT status.

Is a finance lease better than hire purchase for VAT?

They are different, not universally better or worse. Finance leases spread VAT across rentals, avoiding a VAT lump sum, while HP can suit ownership objectives and often includes VAT deferral options. Choose based on cashflow, ownership, and tax advice.

Can I use the Growth Guarantee Scheme to help with fit-out costs including VAT?

Possibly, if you are eligible and the lender is accredited. Use the scheme through providers in our network, and confirm whether VAT can be included in the facility amount.

Can funding cover VAT on equipment, fit-out or refurbishment costs?

Yes — in many cases, lenders can fund the VAT on equipment, fit-out or refurbishment costs, either by including VAT within the facility or through a separate short-term VAT loan or deferral. The exact approach depends on the finance type, your VAT status, and the lender’s policy. Always confirm treatment upfront and speak with your accountant to ensure the VAT profile suits your business.

Updated October 2025

The short answer, when VAT can be included, and why it matters

Most UK businesses buying equipment or paying contractors will face VAT at 20%, and tying up that cash can strain working capital. Many lenders recognise this and will either finance the gross cost (including VAT) or provide a VAT-specific facility that bridges to your next VAT reclaim. Which route fits best depends on whether you use hire purchase (HP), a finance lease, an unsecured business loan, or a revolving credit facility.

If you are VAT-registered and reclaim VAT, you may want a short-term VAT loan or deferral so you are not out of pocket while waiting for your next return. If you are not VAT-registered, you cannot reclaim VAT, so many businesses choose to finance the full gross invoice value to spread the total cost, including the VAT element, over time.

For fit-outs and refurbishments, funding can be structured around stage payments and contractor invoices, including the VAT on each drawdown. Where suppliers invoice at milestones, lenders can mirror that profile so your business is not forced to fund lump-sum VAT from cash reserves.

What funding types commonly cover VAT?

Hire Purchase with a VAT deferral (often three months) or a dedicated VAT loan.
Finance Lease with VAT paid on each rental, not all at the start.
Unsecured business loans sized to cover the VAT portion on projects.
Revolving credit to fund VAT on rolling supplier invoices or stage payments.

Important

VAT rules can be complex for property works, partial exemption, or where special rates apply. Confirm the VAT rate and reclaim position with your accountant before committing.

How VAT works across common funding structures

The way VAT is handled is different across finance products. Understanding this helps you pick the most cashflow-friendly route for your purchase or project.

Funding type	When VAT is paid	Can the lender cover VAT?
Hire Purchase (HP)	VAT is typically due upfront on the full invoice value.	Yes. Many lenders offer a VAT deferral (e.g., 3 months) or a separate VAT loan so you can reclaim before paying.
Finance Lease	VAT is paid on each rental instalment rather than upfront.	Effectively yes, because VAT is spread across rentals, easing cashflow.
Operating Lease	Similar to finance lease — VAT on rentals.	Yes, via VAT on each rental payment.
Unsecured Business Loan	Loan pays suppliers; VAT is financed within the total loan amount.	Yes, if the gross project cost is funded, including VAT.
Revolving Credit / Overdraft	As you draw funds to pay invoices, including VAT.	Yes, subject to limits and lender policy.
Dedicated VAT Loan	Short-term facility aligned to your VAT return dates.	Yes, specifically designed to cover VAT for 3–12 months.

With HP, VAT due at the start can be a cash shock, especially on high-value equipment. The common solution is a VAT deferral, which postpones the VAT element for a short period so you can reclaim and repay it, smoothing cashflow.

With a finance lease, VAT is charged on rentals, meaning you do not fund a large VAT lump sum on day one. This is often preferred by businesses that want predictable monthly outgoings without tying up cash in a VAT prepayment.

For fit-out and refurbishment, lenders may structure facilities to match invoice milestones, including VAT, so you are not left to bridge large VAT balances yourself. An unsecured loan or revolving credit can also sit alongside equipment finance to fund VAT across a wider project.

If you are not VAT-registered

You cannot reclaim VAT, so treating VAT as part of the project cost is common.
Lenders can often fund the gross amount, but affordability still applies.
Discuss total cost of ownership, including VAT, before you choose the facility.

Tip

Compare the total cost of different structures after VAT treatment and potential reclaim. The “cheapest rate” on paper can be less cash-efficient if VAT creates an upfront strain.

Funding VAT on fit-out and refurbishment (including stage payments)

Fit-out and refurbishment projects usually have multiple suppliers, staged milestones, and retention payments. VAT is typically charged on each invoice, so your cash requirement spikes at each stage unless funding explicitly covers VAT. Lenders can build drawdowns to mirror your works schedule so VAT is included.

For construction-related works, VAT can vary depending on the building, its use, and the work type. New-build residential is often zero-rated, some energy-saving materials and qualifying residential renovations attract a reduced rate, while most commercial fit-out is standard-rated at 20%. Always confirm eligibility with your VAT adviser.

Where your business operates in or supplies the trades, you may also benefit from sector-specific lenders who understand stage payments, CIS, and retentions. If this is your sector, see our guide to building services loans to explore tailored options.

Common ways to structure fit-out/refurb finance

Unsecured project loan sized to the gross budget, including VAT on materials and labour.
Asset finance + VAT deferral where equipment is a big component of the fit-out.
Revolving credit to pay supplier invoices as they fall due, including VAT, then recycle.
Dedicated VAT loan timed to your returns for the VAT portion only.

For businesses on partial exemption or with complex property VAT status, advance planning is essential. Funding can be structured to match the VAT profile, but lenders will expect clarity on your reclaim position and timing.

Documentation lenders typically request

Supplier quotes or contracts with VAT rates clearly shown.
Project timeline and stage payments schedule.
Your VAT registration status and reclaim timing.
Latest filed accounts, recent bank statements, and management figures.

How to plan funding for VAT — steps, timing, and eligibility

Planning VAT funding early can avoid avoidable cash pressures mid-project. Align your finance application with your VAT quarter and supplier invoicing so drawdowns and repayments are smooth.

Step-by-step

Scope your spend: List equipment and works, including expected VAT rates and timing.
Choose the structure: HP with VAT deferral, finance lease, unsecured loan, revolving credit, or a VAT loan.
Map cashflow: Align drawdowns with supplier invoices and VAT return dates.
Prepare documents: Quotes, contracts, accounts, bank statements, and VAT registration evidence.
Apply via Best Business Loans: Use our Quick Quote for an eligibility check and matchmaking.
Confirm VAT treatment in writing: Ensure your agreement states exactly how VAT is handled.
Monitor and adapt: If milestones shift, let the lender know early so drawdowns can adjust.

Where security is limited, lenders may assess affordability based on profitability, cashflow, and stability. Directors’ guarantees are common, and rates vary by risk. Government-backed routes such as the Growth Guarantee Scheme may help eligible UK companies access funding through accredited lenders, but not all cases qualify.

To speed up approvals, be specific about VAT amounts by stage. Lenders prefer precise schedules over estimates, especially for larger projects and anything involving landlord approvals or planning constraints.

Best Business Loans is an independent introducer — we connect you with lenders and brokers who are active in your sector and comfortable with VAT-inclusive funding. We do not lend directly, and we do not provide tax or financial advice.

Ready to get started?

It takes minutes to submit a Quick Quote for a Decision in Principle or eligibility check. Our AI matching helps you reach suitable providers without multiple calls.

What you can expect

No-obligation introductions to relevant lenders or brokers.
Clear discussions about VAT treatment before you proceed.
Facilities that aim to match your project’s VAT cashflow.

Quick FAQs, key risks, and next steps

Can funding cover VAT on equipment? Yes. HP with a VAT deferral or a short-term VAT loan is common, and finance leases spread VAT across rentals. Confirm the VAT profile with your lender and accountant.

Can funding cover VAT on fit-out or refurbishment? Yes. Facilities can include VAT on stage payments, or a separate VAT facility can cover the tax portion until you reclaim. Structure it around your project schedule.

What if I am not VAT-registered? You cannot reclaim VAT, but lenders can typically fund the gross amount subject to affordability and policy. Consider total cost and repayment terms across the full VAT-inclusive budget.

Key risks and considerations

VAT reclaim timing: If your reclaim is delayed, ensure your VAT loan term has margin.
Partial exemption/option to tax: Complex VAT positions need professional advice.
Documentation: Missing or changing invoices can delay drawdowns and affect costs.
Rate vs cashflow: The lowest rate is not always the best if VAT spikes create strain.

Compliance and transparency: All information here is general guidance, not advice. Finance is subject to status, lender criteria, and affordability checks. Fees, rates, and terms vary by provider and may change.

About Best Business Loans: We do not lend or provide regulated advice. We introduce UK businesses to relevant lenders and brokers using AI matching and a professional network, with no obligation on your part.

Next step: Complete your Quick Quote to explore options that can include VAT on equipment, fit-out, or refurbishment. It’s fast, secure, and designed to fit your cashflow.

Key takeaways

Yes — many lenders will fund VAT on equipment and projects via HP deferral, leases, loans, or VAT-specific facilities.
Match your funding structure to VAT timing and reclaim dates to avoid cash squeezes.
For staged works, build funding around milestones so VAT is covered at each draw.
Confirm VAT treatment in the agreement and seek accountant advice for complex cases.
Use BestBusinessLoans.ai to be introduced to providers comfortable with VAT-inclusive funding.

Responsible information and advertising notes

Information on this page is for UK businesses only and is provided for general guidance. It is not tax, legal, or financial advice, and you should consult appropriate advisers regarding VAT, accounting treatment, and suitability.

Best Business Loans operates as an independent introducer. We do not offer loans directly. Any introductions are to third-party lenders or brokers who have their own eligibility criteria, fees, and terms. Finance is subject to status and affordability. Rates and terms can change.

We aim to ensure all promotions are clear, fair and not misleading, and we encourage you to read all lender documentation carefully before committing.