MPs attack HMRC over £17bn in overdue tax

HMRC has limited IT funding

HM Revenue & Customs (HMRC) has come under fire for failing to set up a system linking tax debts built up across different forms of taxation, in a bid to gain control over £17bn of overdue tax bills in 2007-08.

A Public Accounts Committee (PAC) report has revealed most taxes are managed using discrete and incompatible IT systems; that it was not possible to readily assess how much each taxpayer has debts covering more than one tax; and that it would cost an estimated £250m for a new system linking existing applications for better debt management.

But HMRC said it had limited available funding to invest in a new IT system for managing debt and is instead looking at ways of linking certain tax systems and bringing VAT within its main debt management system.

PAC chairman Edward Leigh complained the outstanding amount of taxes owed to HMRC was "enormous".

"Linking of debts is crucial to effective debt management and HMRC should introduce a staged programme towards that end," he said.

The PAC report also confirmed that EDS, since acquired by HP in 2008, has now paid HMRC the £25.5m balance of a £71.25m settlement relating to Tax Credit computer system problems.

EDS had paid only £979,000 of £26.5m which had been due out of expected future earnings from new business that EDS expected to win from government departments.

The lump sum, which EDS was under no legal obligation to pay, was handed over in January.