HM Revenue & Customs has postponed switching on a major upgrade to the £140 million pay as you earn (PAYE) tax system.
It has also delayed upgrades to three other projects affecting compliance & enforcement, enterprise infrastructure, and government banking. In March, these projects, together with three others “had issues requiring attention to ensure delivery of the benefits within the planned timescales” according to a new National Audit Office report.
The NAO questioned the likelihood of HMRC achieving planned savings of £11.5 billion by 2011, from its £2.7 billion transformation programme, which includes these delayed systems. The transformation programme also aims to improve customer communication, including through online channels.
Phase three of the Modernising PAYE Processes for Customers was planned to go live in October this year it has now been “postponed” to an undisclosed date.
The automated MPPC system was planned to bring together individual PAYE details on one system and enable HMRC to process the information much faster and more accurately. The overall PAYE system was due to cost £140 million between 2006 and 2011, and deliver £93 million savings over that period, according to NAO figures.
Bernadette Kenny, director general of personal tax at HMRC, said: “Ensuring that our customers are properly served by our PAYE services is of paramount importance to us but we will not go ahead with implementing the new system until it is completely ready.” She said this was a “sensible decision”.
The PAYE system deals with over 60 million tax accounts each year, and generates £235 billion of revenue.
Separately under the transformation programme, HMRC completed a "pensions simplification programme" last year, which ran over its deadlines and ended up costing £76 million, some £8 million over budget. The service enables the pensions industry to file information online and view pension scheme records.
HMRC has spent £552 million on IT services and software in the last two years for the transformation programme. IT accounted for 65 percent of total programme expenditure, according to the NAO.
In the five year period from 2006 to 2011, HMRC will spend £112 million on an "enterprise infrastructure foundation" to deliver improved service levels from IT services at reduced costs, £126 million on the Business.Gov website, £155 million on data security.
Last year, HMRC lost the details of 25 million people on two unencrypted computer discs.
Some £319 million will be spent on programme overheads, changes to its IT overhaul programme, Aspire, run by Capgemini, and IT service line costs.
In November 2007, HMRC renegotiated the Aspire contract with supplier Capgemini. A longer contract was signed, extended by three years to 2017, but HMRC will reduce running costs by 10 percent by 2011. By 2017, HMRC is targeting savings of £658 million.
The NAO said HMRC needed to take more steps make sure it could actually achieve the planned benefits. Tim Burr, head of the NAO, said HMRC had to “establish that the planned benefits are realistic”.
Richard Bacon, chair at the Committee of Public Accounts, said many of the estimates were based on HMRC achieving an increased tax yield, which could not be guaranteed. “The report could not be clearer: a programme of this size and complexity needs realistic planning,” he added.
"If the mandarins at HMRC think using sketchy and volatile estimates is the way to drum up serious savings, they need to get real.”