Feeds

HMRC still waiting for EDS cash

Due to a systems error...

HP ProLiant Gen8: Integrated lifecycle automation

A committee of MPs has said the government has received little of the compensation due from EDS for problems with tax credit IT.

EDS has paid only a fraction of the £26.5m due to HM Revenue and Customs (HMRC) as compensation for problems with the delivery of a tax credit computer system, says a report by the Public Accounts Committee.

It is not certain that the full amount will be paid before the end of the year and the committee urges the department to accelerate the rate of payments and take legal action if necessary.

The tax credit computer system, supplied by EDS, was plagued by problems from the start, which led to hundreds of thousands of claimants being paid late and to substantial overpayments.

In 2005 HMRC announced that it had reached a settlement with its IT supplier for compensation of £71.25m. This sum included cash payments by EDS for the offsetting of certain amounts that would otherwise have been paid to the company by HMRC. Controversially, the payment of compensation was also based on the condition that EDS won further business with Whitehall.

EDS has been less successful in winning new contracts than HMRC expected, so that the flow of payments has been very slow. New business won by EDS by the end of the year is unlikely to generate full payment by the end of 2008, according to the report. Acknowledging this, the department expects that it will take a long time to receive its full dues.

In an earlier report, the committee criticised the "indivious arrangement" by which the government is forced to buy further services from a contractor in order to receive compensation for underperformance.

Edward Leigh, chair of the committee, said: "It was always a very bad idea for the government to have to commission new work from EDS in order to recover compensation for the poorly performing tax credits computer system.

"In the event, EDS has stumped up very little of the settlement to be paid under this arrangement. If the full amount of the settlement, £71.25m, is not paid over by the end of 2008, then HMRC must be prepared to return to the courts."

Another concern is that the amount of tax credit being lost to fraud and error is still running at some £1bn each year. The committee says that, despite the department's acceptance of its recommendations on the need to set targets to reduce fraud and error, it has failed to put any targets in place.

The scale of overpayment to claimants remains high. Although the tax credits system was designed to incorporate some overpayment, because initial awards are provisional, it was not meant to reach the extent of £6bn in three years. The report finds that this money was supposed to be recovered from claimants, but £2.3bn worth has been written off or is unlikely to be returned.

This article was originally published at Kablenet.

Kablenet's GC weekly is a free email newsletter covering the latest news and analysis of public sector technology. To register click here.

Bridging the IT gap between rising business demands and ageing tools

More from The Register

next story
Arrr: Freetard-bothering Digital Economy Act tied up, thrown in the hold
Ministry of Fun confirms: Yes, we're busy doing nothing
ONE EMAIL costs mining company $300 MEEELION
Environmental activist walks free after hoax sent share price over a cliff
'Blow it up': Plods pop round for chat with Commonwealth Games tweeter
You'd better not be talking about the council's housing plans
Help yourself to anyone's photos FOR FREE, suggests UK.gov
Copyright law reforms will keep m'learned friends busy
Apple smacked with privacy sueball over Location Services
Class action launched on behalf of 100 million iPhone owners
UK government officially adopts Open Document Format
Microsoft insurgency fails, earns snarky remark from UK digital services head
You! Pirate! Stop pirating, or we shall admonish you politely. Repeatedly, if necessary
And we shall go about telling people you smell. No, not really
prev story

Whitepapers

Designing a Defense for Mobile Applications
Learn about the various considerations for defending mobile applications - from the application architecture itself to the myriad testing technologies.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Top 8 considerations to enable and simplify mobility
In this whitepaper learn how to successfully add mobile capabilities simply and cost effectively.
Seven Steps to Software Security
Seven practical steps you can begin to take today to secure your applications and prevent the damages a successful cyber-attack can cause.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.