Major concessions on extra powers for the Scottish Parliament will be unveiled in the autumn, David Cameron’s government has signalled.
Scottish Secretary David Mundell said that ministers would put "substantive" changes before MPs.
The Conservative government has previously insisted that the Scotland Bill going through Westminster implements the Smith Commission proposals on greater devolution in full.
Ministers refused to give any details on what powers would be beefed up but one government source said that the changes would be "more than mere drafting fixes".
Another said that they would include a "softening of the language around vetoes" over welfare.
It is understood ministers are also actively looking at resolving the issue of VAT charged to Police Scotland.
The service has been hit with a £23 million tax bill, as a newly centralised organisation.
Labour tabled an amendment to exempt Police Scotland from the charge earlier this month.
Tory ministers have been faced intense pressure to bolster their plans as MPs debated the Bill in recent weeks.
Labour and the SNP joined together to condemn the proposals on welfare saying that they did not fulfil Smith, set up in the wake of the independence referendum result.
The SNP have also protested at what they say are effectively UK ministerial vetoes on Scottish ministers plans on the issue.
Nicola Sturgeon has said that if her government wanted to abolish the bedroom tax the UK government "would still have a right of veto over whether we could or not".
Yesterday Labour also called for ministers to give Holyrood the powers “to design a welfare system fit for the Scottish people” as the party published new research showing Scottish families will be over £1,800 a year worse off.
The SNP's Scotland Affairs Committee chair Pete Wishart said: "Tory vetoes should never have been in the Scotland Bill in the first place.
"As well as bringing the legislation into line with what the Smith Commission recommended last year, the UK government should also strengthen it with the economic and welfare powers that the people of Scotland voted for in the general election - these powers should be in Scotland's hands, not Tory hands.
"The Deputy First Minster has been meeting with David Mundell to put forward the views of the Scottish Government - that the UK government should accept the amendments supported by virtually all Scottish MPs."
Shadow Scottish Secretary Ian Murray said: “Working families across Scotland will be worse off because of the Chancellor’s Budget. And the list of organisations that agree has been growing.
“Our new research shows that the proposed reduction in tax credits will cost an average family over £1800 a year. Despite the Chancellor’s spin last week, this budget will unravel when people see their incomes falling.
“The Government should back Labour’s amendments to the Scotland Bill which would allow the Scottish Parliament to design a welfare system fit for the Scottish people.”
Mr Mundell failed to rule out that there would also be changes to the Bill in the House of Lords.
The move would cut the SNP out of the process, as the party boycotts the Upper House.
The SNP have said that it would be "unacceptable" if unelected peers and "cronies and donors" amended the Bill.
Pressed on the issue Mr Mundell said: "It is my intention to make substantive amendments in the House of Commons when the Bill comes back."
He added that he was reflecting on "serious" and "constructive" amendments brought forward by the SNP and Labour that had been rejected by the Government.
During Scotland questions in the Commons, Mr Wishart said: "You've been asked a very straight and clear question, will you now rule out bringing significant and substantive changes to the Scotland Bill in the unelected House of Lords?
"The House of Lords has never been held in such contempt by the Scottish people who see it as nothing but a repository for the cronies and donors of the Westminster parties."
Mr Mundell replied: "You don't listen.
"The position has been made very clear repeatedly through the committee stage of this debate, that amendments will come forward at report stage and be debated in this House.
"But you have been rumbled - you don't want to participate in proper debate about the issues of concern to the people of Scotland, you are interested in press releases and stunts."
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