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HMRC internal manual

VAT Finance Manual

Credit, debts and related services: debts and related services: asset-based lending

Asset based lending is usually operated in conjunction with one of the factoring products (see VATFIN3220), except that the amount that the client can draw down can also take into account a percentage of the value of the client’s stock and inventory. Thus funds will be provided against invoices, stock, plant and machinery, land and buildings. Between 65% and 85% will be loaned, depending on the type of item.

Lenders in an asset based lending situation have a charge over the above assets that can be invoked in the instance of default. The supply of credit is exempt under the VAT Act 1994, Schedule 9, Group 5, item 2.