The Government has deferred the increase in corporation tax for smaller companies, which will see the 2010 tax rate frozen for 850,000 small businesses.
In his pre-Budget report, Chancellor Alistair Darling said that the move will help stabilise small businesses until the economic recovery is secured.
The rate will remain at 21 per cent during 2010/11.
Darling announced that HMRC’s Time to Pay scheme, which allows businesses to pay all taxes including VAT, Nat-ional Insurance contributions and PAYE through a personalised timetable, will be ext-ended indefinitely.
He said: “The scheme has helped over 160,000 businesses spread tax payments over a timetable they can afford. They get additional time when they need it most and, because firms continue trading, the likelihood of companies paying the tax owed increases.
“So I have decided that the scheme will be extended for as long as is needed.”
He also confirmed that VAT will return to 17.5 per cent on January 1, 2010.
On the freeze on corporation tax, the Federation of Small Businesses national chairman John Wright says: “Holding off the planned rise in small companies’ corporation tax will help companies expand, invest and grow out of the recession with confidence.”