The Treasury has deferred £20 million VAT payments owed by MG Rover suppliers to keep "vulnerable but viable" companies afloat.
The MG Rover Task Force and regional development agency Advantage West Midlands today announced that HM Revenue and Customs will temporarily suspend tax liabilities up to the limit of the £120 million of bad debt owed by MG Rover and Powertrain.
The decisions will be worth about £20 million of cashflow in the short term.
In addition, HM Revenue and Customs has already started to talk to all relevant companies in the supply chain about deferral of their VAT/PAYE/NI payments.
The department said each agreement will be on a case by case basis and where applicable will likely be for three months or more.
The task force is also committing £280,000 to reinstate the Longbridge IT system. The move will help ensure that suppliers with car parts held at Longbridge can come to the distribution centre and get their goods back quickly.