New tax credit system locked into roll-out date

Inland Revenue is to go live in April 2004 with a complex change to its tax credits software which could affect more than eight...

Inland Revenue is to go live in April 2004 with a complex change to its tax credits software which could affect more than eight million people - but it has no contingency plan to defer the date if testing highlights problems.

This decision was made despite the chaos that accompanied the introduction of a new tax credits system in April this year.

This deployment saw a compressed period of testing which, in part, led to the tax credits system going live before bottlenecks in links between computers were identified.

The result was that screens went blank when Inland Revenue staff were already struggling to cope with a mounting backlog of claims for payment of tax credits.

At an inquiry into the system last week by the House of Commons public accounts committee, MPs were venomous in their attacks on the Inland Revenue and its main IT supplier, EDS.

A concern of MPs was that EDS had not warned the Inland Revenue which, in turn, had not advised ministers, that the shortened testing period could affect millions of claimants.

Now Computer Weekly has learned that history could be repeated next year. Inland Revenue and EDS are planning an upgrade to the tax credits software, known as release four, which involved 250 working years of development.

Staff working on the project said the new software is far more complex than the software used for the tax credits system in April this year. "The introduction of new tax credits this year was much less complex compared to the upgrade in April 2004," said a senior member of the project team.

Despite a two-hour hearing on tax credits, MPs on the public accounts committee were not given any details of the risk that a failure of systems or processes next April could again affect millions of people.

Next year's release will recalculate the claims of up to eight million people, adjust them for over- and underpayments and, for the first time, take account of the claimant's tax history.

The 2003 claims were paid only on the basis of the information given in the application, yet queries about the claims led to millions of callers jamming the Inland Revenue's phone lines.

Staff on the April 2004 project have told Computer Weekly that the Inland Revenue is underestimating and underplaying the potential for problems.

MP and public accounts committee member Gerry Steinberg said at last week's hearing that the introduction of tax credits in April 2003 had led to more complaints and letters from constituents to MPs than any other subject apart from fox hunting. One man glued his hand to the desk of a tax official to draw attention to the non-payment of his claim. The Inland Revenue's auditors qualified the department's accounts.

In preparation for next April's go-live date, the Inland Revenue will post up to 10 million tax credit forms so that people can renew their tax credit claims.

Many will also receive complicated statements which set out the history of the way their claims have been handled. For the first time, the system will also have to process millions of claims from people on income support and jobseeker's allowance.

The Inland Revenue has brought in thousands of staff in anticipation of a mass of phone calls.

EDS, the Inland Revenue's main IT supplier, has much longer to test the performance of systems than it had for this year's introduction of new tax credits - about 18 weeks instead of only four before April 2003.

The impact of an IT or process failure before April 2004 may not be catastrophic. If the worst happened, claimants would receive the same level of tax credit as they do now. But the system would not be able to deal with new claims and over and under-payments would not be adjusted.

Queries from claimants could exceed the numbers that jammed phone lines last April, especially as the number of people who will be affected by the systems will be much greater. It could also lead to the Inland Revenue failing to meet tax legislation which requires the department to reconcile next year's claims with this year's payments.

A spokesperson for the Inland Revenue said, "We have carefully reviewed our plans for future IT releases. An audit by independent IT consultants was commissioned as part of that review.

"Its results are informing the roll-out of the next IT release, which will deliver the processes for finalising tax credit awards and renewing claims in 2004.

"We have drawn up robust contingency plans to support this delivery. The most significant will ensure that payments will continue throughout the process for renewing claims."

Risks remain in tax credits plans

  • No plans to defer launch if major problems emerge

  • New release will re-calculate the claims of up to eight million people

  • EDS aims to test new release for 18 weeks instead of the four for the April 2003 release.

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