The government has backtracked on a scheme which would have led to steep fines for retailers behind with their book-keeping.

HMRC had planned to introduce the Business Record Checks project this April, which would examine small business tax returns backdating several years. Those found not to have adequate paperwork could have been fined up to £3,000.

During the pilot of the scheme in 2011, 12% of the businesses examined were judged to have sub-standard record-keeping practices. If the scheme had been in full operation, it could have led to total fines of up to £15m.

The Federation of Small Businesses had accused HMRC of unfairly targeting smaller businesses at a time when the government was pledging to cut red tape.

The scheme had also come under fire from MPs, who accused HMRC of harassing small firms while taking a soft approach to the tax liabilities of major companies.

A HMRC spokesman said the project would now be delayed pending a more detailed review.