TaxPersonal TaxEDS settles with HMRC for £71m

EDS settles with HMRC for £71m

IT supplier settles longstanding row with HMRC over the tax credits system

EDS is to pay HM Revenue & Customs £71m to settle its dispute over the
tax credits row.

HMRC has been in dispute with the IT supplier since July of 2003 over the
system it supplied, and had earlier this year indicated an intention to go to
court to fight the claim.

Talks to settle the issue came to a head recently, however. A court action
would have held dangers for both sides, with ministers likely to have been
unwilling to explain their actions in court, and EDS unwilling to continue its
dispute with the government, a key client.

The exact value of the settlement is £71.25m.

HMRC chairman David Varney said: ‘We have achieved a settlement of this
complex dispute with EDS agreeing to pay compensation. The tax credits IT
problems had an adverse impact on many tax credits claimants. We were determined
to reach a fair settlement for the taxpayer, and I believe that has now been
achieved.’

In a statement to the press, EDS said is was pleased to have reached a
settlement.

‘We were always focused on reaching an equitable settlement, said Doug
Hoover, EDS managing director for the UK, Ireland and Africa.

‘HM Government remains a very important client for EDS and we are pleased
that we have been able to settle this dispute without incurring the costs and
uncertainties of what would have been a lengthy and complex legal case.’

The settlement does not impact EDS’ prior financial guidance for the fourth
quarter of 2005 and full-year 2006, EDS added.

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