Public Accounts Committee warns over tax collection

The UK tax system may be in trouble if the establishment of a new IT system is not handled better, MPs have warned.

HM Revenue and Customs (HMRC) has been warned that it needs to avoid complacency over its IT systems, as any failure of them could lead to "havoc" for the government and taxpayers.

The House of Commons Public Accounts Committee delivered the shot across the bows of HMRC as it faces up to what it was told is an "enormous challenge" to successfully replace the Aspire contract for the maintenance of its software and hardware, something it is due to do by 2017.

According to the committee, the government's tax department is not currently sufficiently skilled in negotiating the IT contracts needed to secure good-value deals, while there was no clear plan B in place if anything went wrong with the system.

Concern over government IT systems is nothing new, with the previous Labour government being slated over the waste of £10 billion on creating a whole new IT framework for the NHS that did not work.

Voicing his own concerns, committee member Richard Bacon MP said: “There are substantial risks to tax collection if the transition fails, which would create havoc with the public finances.

"HMRC expects the new arrangements to reduce its running costs by 25 per cent. However, the department still cannot estimate the cost of this change, in terms of moving staff, equipment and office space; it could not even provide the committee with a range."

In response to criticism in the report, an HMRC spokesman said the "rapid development" of digital services meant it could offer the prospect of better services for customers in the future, adding that the new contract would also use new digital technology to help deal with non-payment arising from fraud, evasion, avoidance and simple error.

New technology already in use includes the £45 million Connect computer system, which was devised by BAE Systems and launched in the summer of 2010.

It has helped HMRC to track financial data from multiple sources in order to uncover cases of tax evasion by wealthy individuals in the UK.