# Funding a VAT or tax bill without raiding working capital

A VAT or tax bill is the most predictable shock a company faces. You know it is coming, you know roughly what it will be, and yet it still lands as a lump that the current account feels. The trouble is not that the bill is a surprise — it is that it bunches a quarter’s or a year’s liability into one date, often just as other outgoings fall due. This piece looks at why tax bills strain cashflow, the realistic options for meeting one, and where a small, short bridge fits without raiding the working capital the business needs to keep trading. It is general information, not tax advice; speak to your accountant about your own position.

## Why tax bills bunch up cashflow

The problem is timing, not affordability. A VAT-registered company collects VAT on its sales across a quarter and then pays it over in a single payment after the period ends. If that money has been treated as part of day-to-day cash — spent on stock, wages or a supplier — the bill arrives and the cash to meet it is tied up elsewhere. Corporation tax does the same on an annual rhythm: a year’s profit produces one bill due months after the year-end. The liability is real and was always coming; what catches companies out is that it crystallises on a date that may not line up with when the cash is actually in the bank.

The honest framing is that much of a VAT bill was never the company’s money — it was collected on HMRC’s behalf. Treating it as such, and not spending it, is the cleanest defence. But cash is fungible and trading is lumpy, so even well-run companies sometimes reach a tax date with the money committed elsewhere.

## Option one: save ahead

The most robust approach needs no finance at all: set the tax aside as it arises. Some companies run a separate account and sweep the VAT element of each sale, plus an estimate for corporation tax, into it — so the bill is already funded when it lands. It takes discipline and it ties up cash that could be working elsewhere, but it removes the scramble entirely. Where a company can do this, it should; finance is for the gap that saving ahead has not closed, not a substitute for it. Our [cashflow runway calculator](/calculators/cashflow-runway/) can help you see how much headroom the business actually has to set aside.

## Option two: HMRC Time to Pay

If a company genuinely cannot pay a tax bill in full by the due date, HMRC operates a **Time to Pay** arrangement — an agreed plan to spread the liability over a period. It is not automatic and it is not a right; it is an arrangement you ask HMRC for, ideally before the deadline rather than after, and it is most readily agreed where the company engages early and has a realistic plan. Interest generally applies, but a Time to Pay arrangement can be a sensible first port of call for a tax liability specifically, because it deals directly with the creditor that the money is owed to. Your accountant can advise whether it fits and help you approach HMRC.

## Option three: short company finance

Where saving ahead has fallen short and Time to Pay is not the right fit — perhaps the company can comfortably clear the bill within a few weeks once a known receipt lands — a small, short bridge can cover the gap. The point is to use external finance for the tax bill so the company’s own working capital stays where it is needed: paying suppliers, running payroll, keeping the business trading. Borrowing to meet a tax date, then repaying out of an invoice you can already name, is a textbook short-term, defined-end use — exactly the shape we describe in [working capital vs a term loan](/articles/working-capital-vs-term-loan).

This is where a Credicorp facility can sit. The Business Bridging Loan is small and short by design — £50 to £500, over 14 to 84 days, at 0.25% per day, with a one-time £5 fee and a 100% cost cap — and Credicorp Flex offers a revolving line for a company that wants to draw, repay and redraw as cycles repeat. The amounts are modest, so this is a tool for a small, defined gap, not for funding the bill of a large company; size the borrowing to the gap, not the other way round. The company is the borrower, there is [no personal guarantee](/articles/why-we-dont-take-personal-guarantees), and the lending sits [outside the consumer-credit regime](/lending-and-regulation/) under Article 60B because the borrower is a body corporate.

## A simple way to decide

Two questions sort most of it. First: *could this have been saved for, and can it be saved for next time?* If yes, the real fix is the saving discipline, and any finance is a bridge to get you there. Second: *can the company name where the money to repay comes from, and when?* If there is a clear receipt on a near horizon, a short bridge is reasonable; if there is not, the gap may be structural and borrowing will not solve it — a point we make plainly in [when not to borrow](/articles/when-not-to-borrow). For a tax liability specifically, talking to HMRC about Time to Pay is often worth doing before reaching for finance at all.

## The honest summary

Tax bills strain cashflow because they bunch a period’s liability into one date, not because they are unaffordable in the round. The strongest defence is to set the money aside as it arises. Where that has fallen short, HMRC’s Time to Pay deals directly with the creditor, and a small, short bridge can cover a defined gap so the company’s working capital is not raided to meet a tax date. Match the tool to the gap, name your repayment source, and take your own tax advice on the specifics.

## Related
- [Cashflow runway calculator](/calculators/cashflow-runway/)
- [Working capital vs a term loan: matching finance to the need](/articles/working-capital-vs-term-loan)
- [When not to borrow: signs a short-term loan is the wrong answer](/articles/when-not-to-borrow)
- [Products at Credicorp Limited — the bridging loan and Flex](/products/)
- [Lending and regulation — Article 60B in plain English](/lending-and-regulation/)