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EDS pays for tax failure

Final divorce settlement

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EDS has paid off Her Majesty's Revenue and Customs for its failure to provide a working tax credit system.

EDS worked on the system from 1994 to 2004. The launch in 2003 was a disaster and led to over-payments totalling £2bn to almost two million people. Attempts by the Revenue to claw this money back led to even worse problems for some of the UK's poorest people.

In 2005 HMRC sacked EDS and installed CapGemini to run the project.

As part of their separation deal EDS agreed to pay a total £71.25m in installments. HMRC said yesterday that EDS had decided to make a one-off payment to settle their dispute - presumably for less than the total of £71.25m had they chosen to pay it off over time.

The two sides blamed each other for the failure of the project. A report from the Parliamentary Ombudsman said: "Indeed, it is difficult to do justice to the sheer range of problems which have affected customers’ awards."

Although EDS got a lot of flack for the failure others were just as quick to blame the Revenue for mismanaging the outsourcing and frequently changing the spec of the project. ®

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