The chancellor says the reforms will simplify the tax regime

In his pre-budget report, Chancellor Alistair Darling said CGT taper relief would be replaced with a flat 18% rate.

But the Commons Treasury committee says ministers should reconsider because of the impact on small businesses.

Its report argues that the proposed reforms could also have "detrimental effects" on long-term investment.

Mr Darling says the changes are designed to simplify the tax regime.

But industry groups have warned the changes will hit small businesses and entrepreneurs.

Previously, a Confederation of British Industry survey suggested that 63% of small firms did not believe red tape would be cut and about 40% said they had altered business investment plans as a result.

BBC business correspondent Nils Blythe said that the chancellor was unlikely to abolish the central idea of abolishing the complicated range of tax relief currently on offer.