The nation’s smallest firms could be crushed by new proposals, which would drive up the cost of filing their tax returns by a minimum of 20pc - or even as much as 150pc - each year, industry experts and business owners have warned.

Presently, small firms and self-employed workers only file one tax return each year but by 2020, the Government wants these groups to submit these documents quarterly.

The Forum of Private Business, which represents thousands of small companies across the UK, has predicted that the quarterly filing regime proposed by the Chancellor in his Autumn Statement earlier this year, will cost micro businesses an extra £600 a year in accounting fees, hitting £1,600, while companies that employ staff will see their costs rise by £500 to £3,400.

Up to 4m people will be affected by the proposed changes, which go out to consultation next year.

The Federation of Small Businesses (FSB), another lobbying group, has said that its members are “deeply concerned” about the changes.

“Adding more reporting appears out of step with wider Government attempts to reduce the regulatory burden and to streamline tax arrangements,” said national chairman John Allan. “The UK’s self-employed will particularly struggle with this change.”

 The FPB has warned the Government that many UK firms may not even be capable of complying with the new rules, given that many parts of the country still don’t have high-speed broadband, and the portal for reporting accounts “is not robust enough as it is”.

Two in five self-employed workers are either unable to use the internet or need help using Government online services, according to data from HMRC.

“We simply do not feel there is the infrastructure for this level of reporting,” said FPB managing director Ian Cass.

“Tax administration is in many ways the worst type of regulation for small firms as the system is so convoluted and byzantine that they are unable to figure it out themselves, placing themselves in the hands of tax advisors, software companies and the HMRC. Yet it is the owners themselves who count the cost if anything goes wrong, so they have no control but total responsibility.”