Shopkeepers who were repeatedly caught selling illicit tobacco faced tax bills and penalties in excess of £11m last year, according to HM Revenue and Customs (HMRC).

The tax authority said its action was intended to deliver a level playing field for local traders, and that last year a total of 51 bills for tax and penalties totalling £11.5m were issued to individuals and businesses caught storing and selling illicit tobacco more than once.

HMRC said it has long focused on prosecuting shopkeepers who sell illegal cigarettes, but the offenders started to keep fewer cigarettes at their premises in an attempt to avoid prosecution or ensure any sentence after criminal conviction was as low as possible.

As a result it has adopted a new approach to ensure fraudsters are still hit in the pocket.

HMRC investigators examine the frequency and volume of the seizures made, as well as evidence gathered from business cash books, till receipts, bank accounts and other sources to calculate tax and penalties owed.

This approach involves using evidence collected by HMRC, trading standards and the police to calculate the amount of VAT, income tax and corporation tax that should have been paid.

Mel Stride MP, the financial secretary to the Treasury, said: “We will not allow honest, hardworking shopkeepers to be undercut by tax cheats. We are determined to level the playing field.”

Cases included:

• a Grantham man was handed a bill totalling £1,615,499 for selling illicit cigarettes;

• the owner of a Newcastle mini market was given a bill totalling £1,098,488 after investigations revealed he made around £2,500 a day from the sale of illicit tobacco over a five-year period;

• the owner of a London barbershop received a bill totalling £605,057 after HMRC found he was selling illicit tobacco goods and making around £1,000 a day; and

• a Liverpool newsagent was handed a tax bill totalling more than £70,000 after investigations revealed the shop was making more than £250 a day from the sale of illicit tobacco.