Home : Networking : News

EDS must pay up, MPs told

A report has called for the HMRC to take EDS to court if the outsourcing firm doesn't pay its settlement regarding a flawed tax system.

By Nicole Kobie, 5 Feb 2008 at 18:00

gallery

EDS has been slammed by a government report, which said the outsourcing giant hasn't paid up on a settlement claim following errors in a computerised tax system it implemented - which is still costing the government some £1 billion a year.

The payoff follows problems with a computer system supplied by EDS, which supported tax credits from HM Revenue and Customs (HMRC). Errors lead to delays in the processing of claims and incorrect payments, with some two million families being overpaid and now in debt to the government.

In November 2005, EDS was due to pay £26.5 million of the total amount owed by providing new work commissioned from the government.

Edward Leigh MP, chairman of the Committee of Public Accounts, said: It was always a very bad idea for the Government to have to commission new work from the contractor EDS in order to recover compensation for the poorly performing tax credits computer system. In the event, EDS has stumped up very little of the £26.5 million of the settlement to be paid under this arrangement. If the full amount of the settlement, £71.25 million, is not paid over by the end of 2008, then HMRC must be prepared to return to the courts."

Leigh added: "The tax credits situation is as serious as ever. HMRC's attempts to bring the system under any measure of control have so far not been crowned with conspicuous success."

"The amount of tax credit being lost to fraud and error is still running at some £1 billion each year," he said.

In response to the report, EDS said: "The settlement was negotiated in good faith with HMRC and is consistent with EDS' assessment of the merits of HMRC's case. EDS remains fully compliant with the terms of this settlement."

The statement continued: "We continue to maintain a dialogue with HMRC."

The HMRC contract with EDS has caused controversy, including over how it was replaced. A report by MPs last year showed that millions of pounds put forward to encourage competition against the incumbent supplier was just too much.