The influential House of Commons Public Accounts Committee (PAC) said that new firms should receive help when dealing with tax, to give them a chance to survive the crucial first few years in business.

It said firms should receive advice on meeting their tax obligations and that registering for tax should be easier.

The report was welcomed by the Federation of Small Businesses (FSB). A spokesman said:

"When starting a new business the owner is taking a great personal risk and the state should do all it can to support them.

"If they succeed then they will provide employment for people in their local community and taxes to fund public sector services. But 60% of new businesses fold in their first three years so it is incumbent on the Government to reduce the burden of administration to reduce that number of business failures."