HMRC to invest in new IT to boost data quality

MPs voice concern over dodgy data and poor IT leadership

HM Revenue & Customs officials are to upgrade their tax IT systems in an effort to collect money they are owed, which for the financial year 2007-08 could amount to as much as £1bn.

Currently, HMRC estimates that it received £40bn less in tax over the past five years than would have been expected. Much of that is down to fraud, organised crime, along with tax evasion and avoidance.

But there is also a significant shortfall that results from poor data quality, resulting in people being assigned the wrong tax codes. HMRC is now attempting to rectify that.

"We are also in the process of discussing with our suppliers an IT solution that will allow us automatically to sort, identify and crystallise the amounts owing, and then put them into tax codes where we can," Sarah Walker, director of Pay As You Earn (PAYE)/Self Assessment and National Insurance (PSN), at HMRC told the Public Account Committee this week.

According to HMRC, the resultant loss in tax revenues for the financial year could top £1bn, although only a fraction of that is likely to be recoverable.

"Our issues with the annual coding notice are much more to do with the quality of data going through the system [than the software used]," Dame Lesley Strathie, chief executive, HMRC told the committee.

Strathie also said that the technology for its new real-time IT system – for which HMRC received an extra £100m in the comprehensive spending review – will be ready by April 2012. The system will provide the foundation for government plans for a universal credit benefits programme.

But Walker also acknowledged that building the technology was only part of the solution. "The speed at which we have to build the technology and start this process is, to a large extent, determined by the welfare reform needs," she added.

The committee was also highly critical of the IT leadership within HMRC.

The problems of data quality cannot have been helped by an underperforming IT management, said Richard Bacon, Conservative MP for South Norfolk.

"We know it wasn't being adequately performed because the acting chief information officer [Deepak Singh], who applied for the job of permanent chief information officer, didn't get the job," he said.

Singh was subsequently replaced with former Transport for London CIO Phil Pavitt.