HM Revenue and Customs has postponed the launch of an online tax filing system that employers believed would create major problems for firms forced to adopt it.
Construction sector employers and their software suppliers had lobbied HMRC for a delay to the CIS (Construction Industry Scheme) system for the past year. They had argued that HMRC had not provided sufficient time for companies to test their software with HMRC's new IT system.
Construction companies will now be required to validate their sub-contractors' tax status using the CIS system from April 2007 rather than April 2006.
Dennis Keeling, chief executive of the Business Application Software Developers' Association (Basda), said, "We are very pleased with the result - it is a bit of a shock to us."
Basda sent HMRC a letter shortly after the general election requesting that it delay the mandatory introduction of CIS by a year.
HMRC said, "We have been monitoring industry's implementation progress for some time. Latest soundings indicated that the cumulative risk around readiness had become unacceptably high."
HMRC has also postponed the launch of a third-party website for testing suppliers' messaging capabilities. The website had been due to go live this month.
Civil servants have yet to confirm when construction companies will be able to do end-to-end testing with the CIS system.
Keeling said, "I understand they want much closer co-operation with all sides of the construction industry and with software developers."