New small firms 'need tax break'

Former Dragon's Den member Doug Richard says tax breaks are vital

Newly established small firms should be given some form of tax exemption for their first year or two of business, a report has concluded.

The suggestion is one of 10 core findings in the study produced by the British Library's Business & IP Centre.

It adds that a fast-track scheme should be created to help firms patent ideas, and that broadband speeds must rise.

The report has been produced to coincide with Global Entrepreneurship Week, which starts on Monday.

'Avoid gimmicks'

Former BBC Dragon's Den panel member Doug Richard, who was one of the business experts questioned in compiling the report, said tax relief was the best way to provide incentives to aspiring entrepreneurs.

"It takes a good 18 months of solid work before a new business starts to really establish itself," he said.

"If the government is serious about encouraging enterprise in the UK, then they need to avoid gimmicks like the VAT cut, and offer start-ups a genuine exemption from tax until they get their businesses up and running."

The government is currently offering a tax break to firms suffering a temporary financial squeeze in the recession.

The Business Payment Support Service programme allows companies to apply to delay any payments due to HR Revenue & Customs, be they VAT, national insurance or staff income tax.

Other suggestions put forward by the British Library's report include an increase in maternity leave subsidies, the creation of a subsidised national internship scheme, and a plan to make it more straightforward for small firms to apply for government contracts.