Three-quarters of all UK small businesses believe they would be able to expand their companies and recruit if the tax system was simplified, research has found.

IT contractors would be just one of the sectors of recruitment to benefit from a more straightforward taxation system, according to the Federation of Small Businesses (FSB).

Many small businesses spend too much time working out their tax liabilities, with 62 per cent having use resources employing outside help, the FSB added.

The government needs to recognise the key role small businesses play in overall economic recovery and make their lives easier, said FSB national chairman John Wright.

"Potential investment and jobs which could be created through such a move would provide the economy with the boost it needs to sustain recovery," he added.

According to market intelligence group International Data Corporation, 99.8 per cent of firms across western Europe employ fewer than 500 people.