A tobacco-processing machine, believed to be capable of producing more than £700,000 of illicit tobacco a day, has been seized in Derbyshire after an investigation by HM Revenue and Customs (HMRC).

Officers from HMRC and Derbyshire Police dismantled the suspected illicit tobacco factory at an industrial storage unit near Derby city centre on Monday 23 March. More than 1.2 tonnes of tobacco, worth an estimated £283,000 in duty and taxes, was seized during the operation.

A 38-year-old man from the city of Derby was arrested and has been released on bail until June. Investigations are ongoing.

Stuart Taylor, assistant director, criminal investigation, HMRC, said: “Tobacco fraud costs the UK £2bn a year in lost tax and this factory alone had the potential to rob taxpayers of hundreds of thousands of pounds a day in evaded excise duty.

“In addition to significant revenue loss, illicit tobacco products damage legitimate businesses and the trade is unregulated making cheaper tobacco more readily available to the young and vulnerable.”