EDS faces £100m tax credit bill

EDS’ disastrous handling of the child and working tax credits IT system could cost the US computer giant £100m in compensation, after Whitehall sources confirmed that the government would make a High Court claim for compensation unless an agreement is reached next week.

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Accountancy Age understands that Treasury ministers and Revenue & Customs deputy chairman Dave Hartnett are determined to make EDS pay for technology and administration problems, which have led the department to overpay tax credits by about £600m.

A team of internal Revenue lawyers has been working on the case full-time for months to prepare for a High Court hearing. Just how seriously it is being taken is highlighted by Hartnett’s direct involvement.

Having won the support of Treasury ministers to pursue the claim, he is understood to be adamant that the department go to the High Court unless EDS meets all of its compensation demands, which are believed to top £100m.

The negotiations are set to enter their most critical stage next week after Revenue insiders said the talks would reach ‘a point of no return’ and that ‘lawyers will take over’ unless a settlement can be reached.

‘Revenue is clear that if it is not possible to reach an acceptable negotiated settlement, we will commence legal proceedings,’ a Revenue statement said. ‘Such proceedings will begin with the issue of Revenue’s claim and detailed particulars of claim which will be public documents in the Technology and Construction Court of the High Court.’

EDS confirmed that next week would mark a new stage in the negotiations, but said it was confident that a successful resolution could be reached. ‘We are about to enter an important stage in negotiations with Revenue and we believe this can resolve any outstanding issues,’ said a spokesman.

But the company would not comment on whether financial recompense was likely, saying only that it was an issue for the negotiations.

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