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Inland Revenue threatens EDS over tax fiasco (again)

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The Inland Revenue is again threatening to sue EDS over the failure of its tax credit system.

The two have been at loggerheads for some time and the Revenue last let its frustrations leak out in June. The Inland Revenue sacked EDS in December 2003 and awarded the work to CapGemini, Fujitsu and BT.

The two are still in talks to decide who picks up the bill for the disastrous tax credit project. But a "senior government official" told the FT yesterday: "patience is fast running out". The Revenue wants a settlement offer from EDS soon or it will go to court.

Almost half a million of the poorest households were given £2.2bn too much in tax credits in 2003-2004. The Revenue then tried to get this money back. The Revenue blame EDS for providing inadequate systems while EDS blames the overpayments on the policy rather than the implementation of the system and the Revenue for changing its mind while the project was put in place.

In more bad news the National Audit Office yesterday refused to sign off the Revenue's accounts. The NAO said Revenue error rates were unacceptably high - some ten per cent of PAYE tax payers are paying the wrong amount. ®

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