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06 Jan 2009
HM Revenue and Customs has settled a long-running legal dispute with IT supplier EDS over problems with the tax credit IT system introduced in 2003.
EDS has agreed to pay £26.5m to HMRC settling in full an agreement reached in 2005 to pay a total of £71.25m
A spokesman for HMRC said the department 'welcomes the settlement'.
Confirmation the case has now been resolved brings to an end a bitter and high-profile dispute between the government department and one of the world's largest IT suppliers.
It will also be a relief for the government which has been plagued by a series of high-profile IT fiascos.
Problems with the EDS IT system meant thousands of families were unexpectedly overpaid after the government introduced the tax credit system.
The tax credits were supported by a system built by EDS – then HMRCs main IT supplier.
A spokesman for EDS declined to comment when asked to confirm settlement of the case, saying HMRC were responsible for any communication regarding the outcome.
Further Reading:
Government in "delicate" talks with EDS over compensation payment
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Litigation Settlement Strategy
Why didn't HMRC sue for all the money up to the Lords if need be? This is what they would have at least threatened in an HMRC-taxpayer dispute. Because that is not in the real world whereas a dispute with EDS is.
Posted by: Jack Harper, 07 Jan 2009 | 00:00
How at fault was EDS?
I don't suppose we will ever know how 'faulty' the system was or how 'at fault' was EDS.
I remember talking to Sir Nick Montague about this when he was Chairman of Inland Revenue. EDS had been given insufficient time to build the system and were forced to bring it online too quickly - all for political reasons at the time. Sir Nick, for whom I had I high regard, disagreed. This was the only time I felt that he was out of touch with what was really going on.
The underlying rules and principles of the tax credit system were flawed at the outset (and remain so). I have long felt that EDS were unreasonably blamed for what became called IT problems that no one could have avoided given both the speed with which the system was introduced and the unworkable rules which led to the massive increase in one jump from £2,500 to £25,000 in the ?income disregard? rule.
Posted by: Mark Lee, 07 Jan 2009 | 00:00