Alistair Darling has confirmed in his Pre-Budget Report that the rate of VAT will return to 17.5% from 15%.

Some believed VAT could be increased above the 17.5% rate but Darling said there were no other announcements planned in relation to VAT.

Dealers that have not already prepared for the switch back will have to adjust all systems to cater for the change in VAT.

Other measures announced in the Pre-Budget Report include:

• A 1p rise in corporation tax has been postponed.
• The Enterprise Finance Guarantee Scheme to encourage banks to lend to small businesses has been extended for 12 months, guaranteeing a further £500m of loans.
• The Time To Pay scheme, allowing companies to spread tax payments, will be extended.
• Electric cars have also been made exempt from company car tax for the first five years, with a 100% first year capital allowance for electric vans.

Darling said he was confident the UK's econonmy would return to growth at the turn of the year.

He said: "I'm confident the economy will recover but we cannot be complacent.

"I have targetted growth of up to 1.5% in Q4 and up to 3% in 2011."