Cabinet Office Minister Michael Gove has said a Vat margin scheme will be reintroduced after Brexit changes risked massive costs to the used car industry here.
A change under the NI Protocol meant that local dealers were having to pay 20% VAT on second-hand cars brought over from Britain.
Mr Gove said yesterday: "I can confirm that HMT and HMRC will reinstate a margin scheme in order to ensure that Northern Ireland customers need pay no more than those in any other part of the United Kingdom."
Used car dealers here said that the VAT change could have put many of them out of business.
Some local dealers import as many as 90% of their cars from Britain.
Cecil Hetherington, chief executive of Usedcarsni.com, said the statement by Mr Gove "looks like good news".
"He has categorically stated that they will reinstate a margin scheme, so provided it is done fairly quickly, then that should sort the problem," he added.
The new arrangements meant that a £10,000 car would be liable for VAT of £2,000 - instead of the former regime, where VAT was paid on the profit margin made after the car was sold on by the dealer.
VAT of £2,000 on a £10,000 car contrasts with VAT of £200, where a £10,000 car was sold on for £11,000.
DUP MP Sir Jeffrey Donaldson welcomed the Government's announcement, adding: "We will want to see the full detail of this, but without a solution the Northern Ireland Protocol was on the verge of destroying practically every second-hand car business in Northern Ireland."