The Government is launching a major crackdown on fraudsters who “hijack” automotive companies. Corporate identity theft happens when cheats take over a company by telling Companies House the firm's directors have resigned.

Fraudsters then submit their own names and change the address of the company before running up massive debts. Now the Department of Trade and Industry says the Government is working to address the issue with the Company Law Review.

“In this area they include a new criminal offence of knowingly or recklessly delivering false information to Companies House, and giving each company director a unique identify,” a DTI spokesman says.

The news comes after Nichirin, the Manchester-based car parts manufacturer, found its company had been “hijacked”. Finance manager Yoko Warburton is dismayed that Nichirin has to foot the bill for correcting the details to Companies House.

Nichirin has invested £2.8m in its site since 1999. The firm, which employs about 55 staff, has a turnover of nearly £6m. Metropolitan Police detective sergeant Paul Horlicks is urging companies to be vigilant.

He says firm's should always check their credit reports and financial information regularly, as well as maintaining careful and accurate accounting records. “Firms should also make sure that unwanted documents are shredded rather than just thrown in the bin,” Horlick says.

Identity theft can go on for years without the victim realising and leave them facing massive debts and possible court action. In America the scale of the problem is huge. California keeps a record of ID theft victims while Los Angeles has detective squad dedicated to identity theft.