Exchequer Secretary David Gauke said there was evidence the Business Premises Renovation Allowances (BPRA) scheme was being exploited for tax avoidance.
The scheme provides 100% capital allowances for the capital costs of converting or renovating empty business properties in certain disadvantaged areas of the UK where the property has been empty for at least a year.
But in a written ministerial statement, Mr Gauke said HM Revenue and Customs had discovered the scheme was being exploited.
He said there was evidence most of the projects using the scheme were "seriously flawed", telling MPs the taxman would now investigate anyone using them. There would also be a review before new legislation was introduced next year to tighten up the scheme, he said.
Mr Gauke told MPs: "The Government remains committed to the objectives of BPRA, which is to foster the regeneration of deprived areas, by helping to increase private investment, enterprise and employment in deprived communities.
"The Government is fully committed to tackling tax avoidance to ensure the Exchequer is protected and fairness is maintained for the taxpayer.
"The Government has, therefore, authorised HMRC to conduct a technical review of the BPRA legislation, with a view to making its policy purpose even clearer, so that the scheme may be made simpler and more certain in its application, at the same time reducing the risks of exploitation.
"HMRC will shortly be publishing this technical review, along with an associated Spotlight article to alert people to the fact that almost all of the disclosed BPRA schemes appear to be seriously flawed and that HMRC will investigate anyone using them."