SMALL businesses' cash flow could be improved thanks to the extension of a VAT deferment scheme.

The Cash Accounting Scheme allows eligible businesses to defer paying their VAT until they have received payment from their customers, rather than when they issue and receive invoices.

Only companies with an annual turnover of less than £660,000 are currently able to benefit from the scheme, but that turnover threshold will be increased to £1.35 million from April 1.

Phil Lee, partner at Cowgill Holloway's small business unit, which advises more than 1,500 small businesses in the North West, said: "The extension of CAS is great news for small to medium-sized companies as they will be able to manage their biggest stumbling block, cash flow, more effectively.

"The Government estimates that 50,000 companies will benefit from the extension of CAS, which will help them to thrive."

Cowgill Holloway's small business unit, established in 1996, works with businesses with turnovers that range from less than £15,000 a year to nearly £5 million.