The Forum of Private Business is warning firms to pay their tax bills on time or face large fines, amid criticisms that HMRC’s paperwork spot checks regime is targeting them at the expense of large companies.

The Forum has written to David Gauke, the Exchequer Secretary to the Treasury, to complain about HMRC’s ‘harassment and mistreatment’ of small businesses, including imposing steep fines for even slight delays in tax bill payments as well as records errors or omissions, while at the same time agreeing ‘sweetheart deals’ with some of the UK’s largest companies.

Recently the Public Accounts Committee estimated that unpaid taxes from big businesses could amount to more than £25 billion, prompting the Prime Minister, David Cameron, to pledge action on tax avoidance.

However, in September 2011, following a pilot exercise in which just 12% of firms displayed ‘seriously inadequate’ paperwork, HMRC extended its small business records checks project, meaning 20,000 firms are in line for visits from the taxman in 2012-13.

The Forum's 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.

“Operating such a strict, punitive small business records checks regime while effectively allowing large companies to do as they please is completely unfair.”

 The Forum has called for reforms to PAYE, the speed of HMRC's internal procedures and the treatment of customers. In addition, as part of its headline Get Britain Trading campaign, the organisation wants a major root-and-branch simplification of the tax system to make it easier for small businesses to negotiate their tax responsibilities.