New research by the accountants and business advisers shows business in Yorkshire and the North East reported 23 cases of fraud, worth a total of £13 million for first half of the year.

That made the region one of the UK's fraud hotspots with 16 per cent of the overall total of business crime, second only to London.

BDO's research shows fraud involving UK business is increasing dramatically - up 42 per cent on same period last year - and now falls into two distinct categories, multi-million pound VAT frauds and fraud against businesses.

Big VAT frauds are typically conducted by gangs with criminal links. Although Revenue & Customs has launched prosecutions after lengthy investigations, the potentially huge rewards mean that these frauds are still becoming ever more attractive to criminals

BDO Stoy Hayward predicts that recent legislation to reduce these VAT frauds will not prove effective as gangs will simply switch from frauds which initially involved mobile phones, tobacco, alcohol, fuel and cars to other, easily transportable, high-value items.

Frauds against businesses typically involve employees or directors abusing a position of trust, often in conjunction with an outsider.

And the larger the sum stolen, the less likely the fraudster is to be prosecuted as. in most cases, victims primarily focus on recovering the assets, preventing future frauds and minimising publicity.

The firm adds that only the unlucky few end up facing a prison sentence, typically ranging from two-five years, even for involvement in multimillion pound deceptions.

Simon Bevan, the Leeds-based national head of BDO Stoy Hayward's fraud services team, said: "Sadly crime does often pay at the moment if you are a fraudster, which explains why large frauds are on the increase – this is a crime driven by greed, not need.

"Professional criminals have been quick to notice the millions that can be made from VAT carousel frauds. While there has been a crackdown I am sceptical it will halt this avalanche of huge frauds against the taxpayer. If you make tens of millions, and then succeed in keeping even a few per cent hidden when you get caught, then you will end up with a small sentence and a large amount hidden in an offshore bank."

"When it comes to frauds against businesses, if you are discovered there is only a small chance of being prosecuted.

"When a fraud is discovered, all but the very largest are not a priority for the police given their limited resources. Businesses, not surprisingly, focus on getting the money back and protecting their reputations – so few of such cases, less than 15 per cent, result in a prosecution. In this case, the worst a fraudster will face is losing their job and having to repay most of their ill-gotten gains.

"Many fraudsters are laughing all the way to their offshore tax haven.