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Firms forced to settle VAT bills early

CONTRACTORS may have to pay VAT on building work they have not yet been paid for under new rules to be introduced by Customs & Excise.

A loophole which allows financial institutions to avoid paying tax on new buildings will be closed on January 1.

Previously, contractors settled VAT after they had been paid themselves.

But from next year they will have to pay VAT no later than 18 months after the completion of a development.

It is an attempt to close a loophole which, if left open, could leave a tax revenue shortfall of £150 million a year.

Customs & Excise said it had been forced into the move because the system was being abused.

They claim some financial firms have been forming 'associated construction companies' to act as an accounting barrier between themselves and the real contractor doing the work.