EDS faces tax credit action

Sir John Bourn, head of the National Audit Office, revealed in a report released last week that discussions are ongoing between the Revenue and EDS for the ‘unsatisfactory performance of the system’.

But the ‘possibility of legal action’ also emerged for the first time after the report said that discussions had continued throughout November and the Revenue ‘hoped to resolve them shortly’.

Accountancy Age reported in May that Revenue chairman Sir Nick Montagu would be pursuing EDS for financial compensation over its role in the debacle. ‘The systems they supplied did not deliver what they were expected to deliver and we are going to have to have some uncomfortable conversations with them,’ he said.

Norman Lamb, Liberal Democrat spokesman for the treasury and member of the Treasury select committee, said legal action ‘certainly ought to be explored’. He added that the problems arose from ‘a combination of a failure by the Revenue and EDS, together with a hopelessly daunting bureaucratic task set by government’.

The NAO report goes on to say that problems with the tax credit computer systems would not be fully fixed until spring 2005, which will be a bitter pill for taxpayers to swallow.

This could lead to Revenue staff taking strike action, because the Public and Commercial Services Union, which looks after their interests, threatened industrial action if there was any repeat of the chaos experienced this year.

A spokesman for the Revenue said the department was still in discussions with EDS and that ‘we will see what happens after that’. He declined to comment further saying it would be ‘inappropriate to pre-empt the results of those discussions’.

Another complication is that EDS is one of two consortia bidding for the hugely lucrative £4bn Revenue ‘Aspire’ contract. EDS and Accenture will fight it out with Cap Gemini, Ernst & Young and Fujitsu for the work, with the winner expected to be announced sometime in December.

EDS declined to comment, but issued a statement saying: ‘EDS continues to maintain a dialogue with the NAO and the Inland Revenue in relation to the report’s findings and will continue to engage with all appropriate stakeholders with regard to this issue going forward.’

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