MPs to discuss EDS' £71m settlement with Revenue

An unusual £71.25m "aggregate" settlement between EDS and HM Revenue and Customs over tax credits is likely to be discussed at a House of Commons committee next month.

An unusual £71.25m "aggregate" settlement between EDS and HM Revenue and Customs over tax credits is likely to be discussed at a House of Commons committee next month.

In an agreed statement, HMRC and EDS said they had successfully concluded an "aggregate settlement of £71.25m, including an up-front payment and payments of additional amounts over time".

MP Richard Bacon, a member of the Public Accounts Committee, said he wanted to know whether the £71.25m would actually be paid to the government.

HMRC refused to answer questions about whether significant amounts of the £71.25m would actually pass from EDS to HMRC, or whether the figure was mainly a paper-based sum. A spokesman for the department said the matter was "commercial in confidence". HMRC confirmed that EDS was continuing to work for the department but was doing only two small pieces of work that were due to end this year.

Bacon said, "I can see no reason whatsoever why the settlement should be commercially confidential." 

The supplier suggested in a statement that the settlement does not have any major effect on its profits. It said, "The settlement does not impact EDS' prior financial guidance for the fourth quarter of 2005 and full-year 2006."

Talks between EDS and the government over compensation for software-related problems which caused incorrect amounts of tax credits to be paid to claimants, lasted about a year without a writ being issued.

Both sides were reluctant to go to court. Neither wanted the uncertainty of a hearing, and the government is unlikely to have wanted internal ministerial and civil service documents over the tax credits released in open court.

These documents could have included confidential Gateway reviews - independent assessments of the tax credits project - by the Office of Government Commerce. Officials across government have so far blocked all requests under the Freedom of Information Act to publish the results of Gateway reviews.

It is possible that the "aggregate" sum could include various forms of non-cash payment. These could range from free services to a reduction in the costs of past and future work for the government.

Bacon is expected to question David Varney, chairman of HM Revenue and Customs, on the settlement at a committee hearing on 14 December.

EDS declined to add to its official statement, in which Doug Hoover, EDS managing director for the UK, Ireland and Africa, said, "We were always focused on reaching an equitable settlement."

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