The European Parliament has voted to exempt so called 'micro' businesses from complex EU accounting rules, which will mean a huge reduction in red tape for many small firms.
The move follows a long campaign by Liberal Democrat MEPs to reduce the burden of unnecessary bureaucracy for small firms and the self-employed.
Under the change, millions of small businesses with no more than 10 employees and turnover below €700,000 (around £590,000) must now only comply with national reporting rules which usually demand very basic financial information.
The vote followed a two year tussle between MEPs and Member States in the Council of Ministers over the size of business to be affected by the term 'micro entity'.
The proposal has been strongly supported by Liberal Democrat Euro MPs.
Liz Lynne, First Vice President of the Employment and Social Affairs Committee, said the vote at the last plenary session of the Parliament in Strasbourg was a significant victory in the battle to scrap pointless red tape.
She said: "This decision strikes a blow for common sense at a very difficult time for business. The battle to scrap over-complicated red tape is crucial for small firms at this time when bank credit is tight and trading conditions difficult.
"It is important for small businesses to provide basic financial information to comply with national laws on transparency and tax, but full scale complex accounts of the kind used by businesses operating regularly across national borders are not necessary."
Liz Lynne added: "In the Parliament we wanted to include as many small and medium-sized businesses as possible under the simplified accounting rules, while many governments held out for a tighter definition.
"I am glad that after a compromise, we have managed to get agreement on a generous definition of 'micro entity' small businesses in the deal adopted this week.
"It is now up to governments to implement this exemption. I hope the coalition government can introduce the changes here as soon as possible.
"I will also be keeping up the pressure on the European Commission to deliver on its pledge to cut the burden of business red tape by 25%."
Note to editors: Micro businesses under the deal backed by Parliament are defined as firms with a total balance sheet of less than €350,000 (around £300,000), a net turnover of less than €700,000 (around £590,000) and no more than 10 employees on average a year.
According to a 2003 Eurostat breakdown
· 99.8% of all EU companies are SMEs
· 91.5% are micro businesses
· SMEs provide 67.1% of all private sector jobs.