The government is due to go live with the biggest upgrade to the PAYE IT system since the 1950s within the next two weeks.
Ten of the UK’s largest employers will take part in a six-month pilot of the new system which will allow HM Revenue and Customs (HMRC) to update employees' tax details automatically for the first time.
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The real-time information system (RTI), HMRC’s largest IT project, will link employers directly to the taxman through a standard network analogous to the BACS network used for banking transactions.
It aims to lay the foundations for the government’s plans for universal credit, which will begin to replace the current benefits system from 2013.
The project has attracted controversy after the Treasury Select Committee raised questions over the accuracy of HMRC’s tax data that will underpin the new system.
But speaking at a meeting of Computer Weekly’s CW500 club for IT leaders this week, HMRC CIO Phil Pavitt said the project was on track.
“RTI will be live in two weeks' time, fully tested, fully working, and ready in two years, with no fuss,” he said.
RTI, which will eventually affect every employer in the country, will be rolled out to a further 1,600 businesses after six months, and across the UK from April 2013.
Pavitt revealed that HMRC was able to develop the system one year quicker than first anticipated, and at a lower cost than originally planned.
“I said I can do it in three years. They said fantastic, do it in two. I said I need more money. They said, you have less money,” said Pavitt.
The department has been set tough targets to reduce overall costs by 25% and IT spending by 33% under the government spending review, while increasing tax income by £22bn.
Pavitt has led a series of programmes to simplify HMRC’s IT infrastructure, cutting IT spending in the department from £1.4bn to £700m in two years.
HMRC’s renegotiation of the Aspire IT contract with Capgemini, announced earlier this month, will save more than £200m by 2017.
Pavitt has acknowledged that RTI will make existing problems with data accuracy even bigger once HMRC reconciles tax monthly rather than at the end of a year.
"The biggest challenge of RTI won't be the technology; it will be how our business is ready and has re-engineered processes to deal with it," he told Computer Weekly last year.