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Bigger small firms to benefit from new VAT rules

Government extends cash accounting

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Small and medium sized tech firms will be among those to benefit from an extension to the government's Cash Accounting Scheme.

The scheme, which allows qualifying firms to defer paying VAT until they have actually been paid, rather than paying the money to the government as soon as they have invoiced for the work, has been restricted to firms with turnovers below £660,000.

As of 1 April, 2007, companies doing up to £1.35m of business annually will be eligible for the scheme, which should improve cashflow for those firms most dependent on prompt payment.

John Healey, financial secretary to the Treasury, said the changes would mean an extra 50,000 small businesses in the UK would now qualify for the scheme.

"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," he added. ®

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