Boris Johnson has been asked to apologise after his government wrongly announced that Wales would receive an additional £227m of funding on Tuesday.
Plaid Cymru's Liz Saville Roberts said Chancellor Rishi Sunak "rewrapped £227m" already announced as new cash.
It was "wilful misrepresentation" and "deliberately misinforms desperate businesses in Wales", she said.
The prime minister said the important thing was that Welsh Labour ministers spend Covid support funding "sensibly".
On Tuesday the Chancellor Rishi Sunak announced new funding to support business grants in England. The Treasury said, as part of its announcement, that the Welsh Government would receive "additional funding" as a result.
The cash is part of £5.2bn already guaranteed to Wales since the beginning of the pandemic as a result of extra spending in England.
On Wednesday, Ms Saville Roberts asked Mr Johnson if he would "apologise on behalf of his chancellor and recognise that for Welsh Covid measures to be most effective there is an urgent need to lift financial borrowing constraints imposed on Wales by Westminster?"
Responding in the House of Commons the prime minister said: "I'm sure the Right Honourable Lady will not wish to accuse the Chancellor of wilful misrepresentation, but all of the cash we have announced, obviously, is passported on.
"The important thing is that the Labour government in Wales spends it sensibly.
"But the UK government is here to support business, jobs, livelihoods across the whole UK."
Speaker's language warning
Commons Speaker Sir Lindsay Hoyle told Ms Saville Roberts he was "not over happy" with her use of the word "wilful", when accusing the chancellor of misrepresentation.
"I think we've got to think about the language which we use within the Chamber," he said.
"These are times which are unprecedented but I really do think members ought to be careful on the language they use."
Wales minister David TC Davies tweeted on Tuesday: "This announcement from the Chancellor means an extra £227m in funding for Wales."
But it was later clarified that the £227m for Wales was part of the £5.2bn extra funding already guaranteed for Wales as part of the latest funding top-up announced on 23 December.
Business support is devolved and typically the devolved governments receive proportional extra funding from the Treasury as a result of additional spending on devolved areas in England - which they can spend as they choose.
But during the pandemic most additional funding has been given upfront in lump sums rather than in response to individual spending announcements in England.
The £227 million is part of the £5.2 billion given by UKG to WG to help with Covid. This is “up front” unlike how Barnett normally works. Sorry if that wasn’t clear. Perhaps you could now ask WG why over a billion of that remains unallocated at a time business really needs it?— Simon Hart (@Simonhartmp) January 5, 2021
Welsh Finance Minister Rebecca Evans MS said on Twitter: "This funding is part of our existing Covid funding guarantee and is not new money."
Labour Rhondda MP Chris Bryant said: "There isn't a single extra penny for Wales today to fund similar measures for Welsh businesses as apply in England."
The UK Government's Welsh Secretary Simon Hart responded to Mr Bryant on Twitter: "The £227 million is part of the £5.2 billion given by [UK Government] to [Welsh Government] to help with Covid. This is 'up-front' unlike how Barnett normally works.
"Sorry if that wasn't clear. Perhaps you could now ask [Welsh Government] why over a billion of that remains unallocated at a time business really needs it?"
What has the Treasury said?
The Treasury said the money referred to additional funding being provided to the devolved administrations as part of the upfront Barnett formula guarantee.
They said the total amount of extra funding given to the devolved governments since the start of the pandemic was increased by £800m to a total of £16.8bn on 24 December.
It added this figure was likely to increase shortly to take into account any further expected increases in support in England.