The Treasury has announced a change to VAT rules that is designed to give businesses a cash flow boost.
From April 1st, 2007, the threshold of the Cash Accounting Scheme (CAS) will be extended from £660,000 to £1.35 million, helping small and medium sized enterprises (SMEs) to cope with cash flow issues.
CAS allows firms to defer the payment of their VAT until after they have been paid by their customers, as opposed to accounting for and paying VAT when they issue and receive invoices.
The higher threshold will give them greater room to manoeuvre.
"Doubling the threshold of the Cash Accounting Scheme will allow more than 50,000 businesses to significantly improve their cash flow," said Mr Healey.
"We know that small businesses are the engine for the UK's economy, so it is only right that we look to improve the climate for them."
When a business exceeds the CAS exit ceiling it must leave the scheme and account for any VAT outstanding, on supplies made and received while using the scheme, on the VAT return for the period in which they became ineligible to use the scheme.
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