Revenue & Customs published its latest proposals for quarterly reporting, but Mike Cherry, chairman of the Federation of Small Businesses, said that without clear answers to small firms' fears, the plans, due to take effect in 2018, should be delayed until 2020.
'There's still no clarity on what it means in practice. Does quarterly tax reporting actually mean full sets of accounts, being sent in every quarter? Nobody knows the detail yet,' he said.
Cherry also attacked the timetable for introducing the scheme, which will see quarterly reporting introduced in one fell swoop across all firms, including private landlords, rather than being phased in.
'We need to put in place something that has been properly tried and tested, where software works effectively, where concerns around cyber security are allayed. And that is one of the reasons why we've proposed that there is a delay from 2018 to at least 2020.'
The FSB's criticism comes ahead of next week's meeting of the House of Lords economics sub-committee, which will take evidence on the Government's proposals for quarterly tax reports, which are part of its Make Tax Digital programme.
The committee will hear from John Whiting, tax director at the Office of Tax Simplification; Robin Williamson, technical director of the Low Income Tax Reform Group; and Richard Murphy, director of tax research UK and professor of practice in international political economy at the University of London.
The Mail on Sunday first reported on fears over the controversial plan after it was revealed in George Osborne's 2015 Autumn Statement.
Simon Baylis, partner at accountancy firm Moore Stephens, said: 'You just know what's going to happen if the self-employed are required to make quarterly payments.
'Many struggle to do self-assessment once a year.
'There will be a huge penalty issue, with disputes over people being on holiday at the end of a quarter or being sick.
'It will be an absolute dog's dinner and I am very worried about it.
'The Government is not thinking about the real world.'
After an eight-month consultation garnering 3,000 responses, the Revenue announced its plans on Tuesday.
It has revealed that firms will still be able to use spreadsheets for recording their tax affairs, which can then be linked to software to send updates to the Revenue.
It has said free software will be available to most small firms and those that cannot go digital will not have to.
Meanwhile, the self-employed and landlords with turnover of £10,000 or less will not have to comply.
But Cherry said: 'It is wrong for mandating to be bought in for the smallest firms rather than tried and tested with the larger ones first.
'In other areas of tax reform where they've done things like this it's been bought in for the largest firms first.'
Source: Vicki Owen - Daily Mail