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Under proposals set out in a consultation document, HMRC states that up to 50,000 small businesses will be targeted by HMRC agents in order to check that their business records meet minimum reporting standards.

In the most serious cases, those who fail to comply with their record-keeping obligations may be liable to pay a penalty of up to £3,000.

However, the business lobby group said the consultation, which closed on 28 February, lacked information on how HMRC would choose businesses and carry out the checks.

It added that HMRC had failed to draw up details of the standard criteria that would be used to assess each business, and that variation across different sectors will make it difficult to justify a ‘significant failing'.

The organisation is now calling for the release of more detailed guidance on the scheme and for the charging process to be left as it currently stands.

‘Rather than imposing fines which could cripple some small firms, it would be more pertinent for HMRC to move to a system where small businesses are encouraged to improve record-keeping and understand their tax obligations better,’ commented Roger Bibby, FSB Economic, Tax and Finance Committee Chairman.

‘At a time when the Government is looking to promote growth and get the recovery on a firmer footing, adding to the bureaucracy that a business owner has to deal with through additional checks, goes against what the Government is trying to achieve.’