PAC warns HMRC over tax collection risks

27 Jan 15
Revenue & Customs’ plans to move to a new computer system to administer tax collection could cause ‘havoc’ to the public finances if the implementation is botched, the Public Accounts Committee has warned.

By Judith Ugwumadu | 27 January 2015

Revenue & Customs’ plans to move to a new computer system to administer tax collection could cause ‘havoc’ to the public finances if the implementation is botched, the Public Accounts Committee has warned.

The committee of MPs said it had concerns about HMRC’s ability to move from the current single Aspire contract with Capgemini to a new model of many short-duration information technology contracts with multiple suppliers in the next two years.

The committee said the HMRC’s IT contract had provided a stable system over the last ten years to support taxes collection.

In 2013/14, the HMRC collected more than £500bn in tax revenue and the committee said it expected the tax department to yield around £5 trillion over the next ten years.  

But it faced an ‘enormous challenge’ in moving to a new contract and ‘appeared to be complacent’ about the scale of the transformation required.

The report, led by committee member Richard Bacon, highlighted that HMRC had made little progress in defining its needs for the new contract and was yet to present a business case to government for the change.

Bacon said it was ‘surprising’ that HMRC was unable to assess properly the value and risks attached to a long-term contract, such as Aspire. Therefore, the department could not evaluate this approach against new government procurement guidelines intended to limit the value, length and structure of ICT contracts.

Once funding was agreed, the tax department would only have two years to recruit the skills and procure the services it would need, he added.

‘HMRC’s record in managing the Aspire contract and other IT contractors gives us little confidence that HMRC can successfully achieve this transition or that it can manage the proposed model effectively to maximise value for money.’

‘HMRC also demonstrates little appreciation of the scale of the challenge it faces or the substantial risks to tax collection if the transition fails. Failure to collect taxes efficiently would create havoc with the public finances.’

The committee has recommended that HMRC and the Cabinet Office should jointly agree key milestones and warning flags leading up to the end of the current contract in June 2017.

This should come with contingency plans that manage the risks to the stability of the tax collection system and the risks to value for money should these milestones be missed, the committee suggested. 

Responding to the report, a HMRC spokesman said that the department was making ‘significant progress’ in preparing for a smooth and effective transition between the IT contracts.

‘We have already opened one new HMRC digital delivery centre in Newcastle, and have plans for others to increase our in-house digital capability, and in December we agreed an amendment to Aspire which allows us to contract services directly with major IT suppliers.

‘The rapid development of new digital services will improve the experience of customers when they need to deal with us, making it easier for them to meet their tax and entitlements obligations, while ensuring that HMRC can fully exploit advances in digital technology to tackle tax fraud, error, evasion and avoidance.’

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