The Construction Confederation had predicted that software failures would lead to contractors being deducted an emergency tax rate of 30 per cent from suppliers' payments forcing many to go to the wall.
Mr Healey said: 'The Government has agreed with the industry to extend from April 2006 to April 2007 the period for implementation of the final elements of the new CIS.'
He added: 'During this period, the Revenue will step up its level of advice and compliance activity with the industry, including new interactive online software and up to 70 telephone advisors.'
Stephen Ratcliffe, chief executive of the Construction Confederation, which had pulled out of formal talks with the Revenue about next year's CIS introduction, hailed the Government's decision as a victory for common sense.
He said: 'We're delighted the Revenue has seen sense. We want an electronic scheme but we want one that works.
'There now has to be a complete timetable drawn up between now and April 2007. People can't sit on their laurels.'
It is the second time the new scheme has been delayed - it was supposed to have been up and running from April this year.
Among the criticisms levelled at the Revenue in recent weeks was that its own computer system would not be ready until next February - just weeks before the new scheme's planned introduction.
And the commercial software, widely expected to be used by thousands of smaller contractors, is still not available. Contractors were also worried that the Revenue's data base was hopelessly out of date.
Earlier this month tax chiefs bungled a major information campaign on CIS by sending mailshots to wrong addresses, defunct contractors and even dead builders.