HM Revenue and Customs (HMRC) has been accused of harassing small businesses, with plans to conduct spot checks on their record-keeping.
Business leaders and Tory MPs criticised the project to inspect up to 20,000 firms from April to check they can back up their tax returns with paperwork going back years.
Those unable to do so face fines of up to £3,000, creating additional difficulties for small businesses at a time when many are already facing the prospect of insolvency.
John Walker, national chairman of the Federation of Small Businesses (FSB), told The Independent: "Despite the worsening economy, HMRC is launching this scheme regardless of the consequences.
"We have spoken to HMRC and expressed our concerns about this a number of times. But as far as they and ministers are concerned it is a policy aim to make this happen.
"There is a huge difference between the rhetoric of the Government about helping small businesses and what it is doing in reality."
The business records checks projects, which was piloted last year, also attracted criticism from Conservative backbenchers who pointed out that HMRC had recently let banking giant Goldman Sachs off part of its tax bill.
Priti Patel, Tory MP for Witham, said: "This is the persecution of small businesses at a time when they are already facing a very, very hard time.
"The attitude of HMRC to small businesses is frankly disgraceful when they are blatantly doing deals with large firms which have allowed them to escape millions of pounds in tax liabilities.
"It seems as though HMRC sees small businesses as low-lying fruit to meet their targets. That kind of persecution is outrageous."
Anne-Marie Morris, Conservative MP for Newton Abbot, added: "It is simply not practical for a company employing just a few people to spend huge sections of their day on administration as well as getting their firm off the ground. This is particularly true when you're coming out of a recession."
Suggested For You
SUBSCRIBE AND FOLLOW
Get top stories and blog posts emailed to me each day. Newsletters may offer personalized content or advertisements.Learn more