UK tax collector falls short on digital efficiency • The Register
The UK’s tax collector is yet to reach the levels of efficiency its investment in digital services has led auditors to expect, according to a new report.
In its annual report on the performance of His Majesty’s Revenue & Customs (HMRC), the National Audit Office (NAO) has set out the challenges facing one of the biggest IT departments in the country as it struggles with a bewildering estate of legacy systems.
In 2024-25, HMRC spent £1.16 billion on IT and telecoms while collecting £858.9 billion in tax. In June’s Spending Review, the government said departments would perform a Zero-Based Review (ZBR) of budgets, taking a “digital-first approach” and involving chief digital and information officers.
The result was that HMRC received an additional £1.6 billion from 2026-27 to 2028-29 to “modernize and reform HMRC’s IT and data infrastructure”, the NAO said.
The extra money is designed to create “significant efficiencies and ensuring that HMRC is a productive and resilient organization”, it said.
HMRC was also allocated funding of £300 million from the government’s Transformation Fund to improve customer services and IT by using “digitalization and artificial intelligence (AI) capability to drive productivity improvements”.
But the new investment comes with a catch. With it, the government expects HMRC to create efficiencies worth £886 million by 2028-29, giving the tax collector higher gross efficiency targets than any other central government department, at 15 percent against its planned spending, the NAO said.
The problem is that the signs so far are not promising. Earlier this year, the NAO reported that HMRC is taking longer to get off legacy systems than it expected and costs are higher than predicted.
“HMRC has not yet achieved the anticipated efficiencies from its digital services,” it said in its report this week.
In the Spending Review, the Treasury said the tax collector should continue to move off legacy platforms and towards more cost-effective, modern software. HMRC has also been tasked with making systems that better connect data and use AI and other digital tools.
The scale of the challenge is illustrated by a £35.2 million contract extension handed to Accenture without competition at the beginning of 2025 to support and maintain HMRC’s National Insurance and PAYE System (NPS), part of the UK’s critical national infrastructure. The system originated under the £10 billion Aspire contracts, which Accenture was part of. Accenture continued to run the system after Aspire officially ended in 2017.
In 2022, the supplier was awarded a contract worth £70.4 million, without competition, to continue running the system and prepare it for a competitive tender to allow a new contractor to modernize it. However, the latest deal in January was necessary because Accenture was the only supplier with in-depth knowledge of the applications and business services, the tender notice said.
Other technical challenges facing the UK’s tax collector in the next five years include its shift to a new SAP ERP platform, under a £366 million set of deals, leading a tranche of three departments making the move.
It is also looking to upgrade the SAP system, which runs the nation’s tax collection, based on the legacy ECC platform, extended support for which ends in 2030. Capgemini, another Aspire contractor, won the deal worth up to £574 million to continue supporting the system until 2029.
Treasury eyes will be on HMRC as it tries to negotiate its exit from these legacy systems while also achieving a 15 percent efficiency saving. ®
