HM Revenue & Customs and US-based outsourcer EDS
have reached a £71m out-of-court settlement over IT problems with
the launch and operation of tax credit systems.
The settlement involves both an initial up-front payment and
subsequent payments over time. HMRC said the settlement was
“commensurate with EDS's responsibility for the IT problems which
followed the launch of tax credits”.
IT problems contributed to difficulties which saw the government
make £1.9bn of overpayments in the first year of tax credits.
HMRC chairman, David Varney, said, “The tax credits IT problems
had an adverse impact on many tax credits claimants. We were
determined to reach a fair settlement for the taxpayer, and I
believe that has now been achieved."
Doug Hoover, EDS managing director for the UK, said, "We were
always focused on reaching an equitable settlement. The government
remains a very important client for EDS and we are pleased that we
have been able to settle this dispute without incurring the costs
and uncertainties of what would have been a lengthy and complex
legal case."
EDS said the settlement would not affect its guidance on
earnings for the fourth quarter of 2005 or the full-year 2006. EDS
provided outsourced IT services to the Inland Revenue from 1994 to
2004, when it was replaced by Cap Gemini.