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NIC holiday scheme should include existing firms

The Government has been urged to extend its NIC holiday scheme to existing as well as start-up businesses.

The move, the Federation of Small Businesses (FSB) said, would help to tackle the problem of growing unemployment.

Under the three-year scheme, eligible new businesses will be able to take a 'holiday' for each of the first 10 employees they hire in their first year of business. Each holiday will last for the first 52 weeks the employee is in their post (providing these weeks fall within the three-year holiday period).

New businesses that participate in the scheme, which is designed to help fledgling firms in regions that are economically hard pressed, will not have to pay the first £5,000 of class 1 employer NICs due in the first twelve months of business, saving up to £50,000 in tax if ten employees are included.

The scheme is open to new businesses set up on or after 22 June 2010 and will run until 5 September 2013. Employers can benefit from the holiday deductions each time they are due to make monthly or quarterly payments to HM Revenue and Customs.

Most kinds of new employers will be eligible for the holiday, provided they meet certain criteria, and most employees will also qualify, although there are some exceptions such as workers engaged through managed service companies.

However, the FSB has argued that the holiday scheme should also include firms that are already trading.

Research from the FSB has shown that businesses looking to take on new staff fell from 12.2 per cent in third quarter of last year to 8.7 per cent in the fourth quarter.

With unemployment currently at 2.5 million, the FSB is calling on the Government to extend the NICs holiday to existing businesses with up to four members of staff that then recruit up to three employees. 

The FSB added that research also indicates that 44 per cent of small firms would take on more staff if the Government cut National Insurance, and that it is also the case that smaller firms are more likely than larger companies to offer jobs to people who have been unemployed in the past 12 months.

By extending the holiday, the FSB said, not only would the Treasury be helping small firms with much needed cash-flow, it would also benefit from the creation of new jobs through income tax and employees NICs. 

John Walker, the FSB's national chairman, commented: "Unemployment is worryingly high, and, with inflation above target, small firms cannot rely solely on the consumer for growth. Government must give a helping hand to small firms and create an environment that helps small businesses grow and develop. While they have gone some way in helping new businesses take on new staff, it needs to go further. 

"We know that small firms would take on more staff if National Insurance was cut, so to really help boost employment in small businesses, the Government must extend the National Insurance Contributions holiday to existing small firms. As we have heard time and again, the Government is looking to the private sector to lead the recovery, but without the right measures in place, small firms are left without the tools they need for the job at hand."

Any new business wishing to find out if they are eligible for the holiday and wanting more details should visit www.businesslink.gov.uk/nicsholiday