Forum of Private Business claims National Insurance holiday is not enough to stimulate economic recovery

The Forum of Private Business has welcomed an NIC holiday for some start-ups but calling for further tax breaks if small businesses are to be the catalyst for sustained economic recovery.

The  Regional Employer NICs Holiday for New Businesses scheme gives new firms in certain areas of the UK a ‘holiday’ on employers’ NI contributions for each of their first 10 employees they hire in the first year of business. It will last for the first 52 weeks the employee is in position.

The launch of the NI scheme follows other recent tax incentives, including a partial reversal of the previous administration’s plans to increase employers’ NI by 1% and a 1% reduction in small firms corporation tax, which was announced in June’s ‘emergency’ budget.

The Government has also launched a new Office of Tax Simplification to provide ‘independent advice on simplifying the UK tax system’.

Following the budget’s sweeping public sector cuts, the Government is hoping to create a private sector led recovery – with small business growth placed at the forefront of this revival. However, the not-for-profit Forum is warning that, unless further cuts follow, disproportionate taxation will remain a major barrier to growth for small businesses.

The Forum’s chief executive Phil Orford, said: "For years small business taxation has steadily increased, so this reduction in NI for some firms has to be welcomedHowever, if the Government is serious about creating conditions for real economic recovery based on strong small business growth, it needs to introduce even bolder tax policies.

 "Given the significant threats to cash flow and business growth from issues such as a lack of bank finance and increasing late payments, recruitment is likely to be slow during the first 12 months for many new firms. The scheme should be available for a longer period than just the first year they are in business."

The scheme is open to new businesses set up on or after 22 June 2010 and will run until 5 September 2013.

It applies to start-ups in the North East, Yorkshire and the Humber, the North West, the East Midlands, the West Midlands, the South West, Scotland, Wales and Northern Ireland. It does not apply to businesses in London and the South East.

In addition, new businesses in the agricultural, fishing and coal sectors will not be able to claim the tax break, worth up to £5,000 per employee.

This article was first published on hrmagazine.co.uk