David Cameron has pledged to take action on tax avoidance after the Public Accounts Committee estimated that unpaid taxes from big businesses could amount to more than £25bn.

However, in September 2011 the HMRC extended its small business record checks projects, with around 20,000 SMEs to be visited in 2012/13.

The FPB has written to David Gauke, the Exchequer Secretary to the Treasury, to complain about HMRC’s "harassment and mistreatment" of small businesses.

In the letter it criticises the government for steep fines for slight delays in tax bill payments, records errors and omissions, as well as agreeing "sweetheart deals" with some of the UK’s largest companies.

FPB chief executive Phil Orford said: "Small businesses want to keep proper records but struggle with the significant administrative barriers that exist in the UK.

"They also want to pay their tax bills on time but the reality is that many firms are struggling with cash flow in extremely tough economic conditions - yet HMRC is being completely inflexible.

"Entrepreneurs are crying out for a better tax regime that supports their ambitions and is conducive to growth, not one that provides constant hurdles to overcome and punishes them disproportionately."

The FPB is now warning small businesses to be prepared and proactive when it comes to tax returns wherever possible.

Orford added: "Obviously entrepreneurs will want to make sure they are not caught out and hit in the pocket at a time they can least afford it, but it is advisable to try to focus on creating business intelligence that works for you - that you can use to your benefit."