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PAC demands rejigged IT investment action plan from HMRC by end of March 2021

A report by the Public Accounts Committee confirms HMRC is spending too much money on patching legacy IT systems, and needs to prioritise investing in the modernisation of its digital estate

HM Revenue & Customs (HMRC) has until the end of March 2021 to provide the Public Accounts Committee (PAC) with details about how it plans to rejig its technology investment priorities and spend more on modernising its IT systems.

The deadline follows the publication of a 24-page report by the PAC that sought to assess whether the government tax collection agency has the resources and capacity required to deliver on its various commitments, including its ambitious digital transformation strategy.

“HMRC should write to us, by the end of March 2021, setting out what it is doing and has planned, to focus IT investment on modernisation for the future, while retaining resilience, so it can move on from the need to simply keep patching up legacy systems,” the document stated.  

This is in response to the conclusions reached in the report that HMRC “has spent too much of its IT budget on patching up legacy systems rather than modernising them”, and that the “department accepts it should redress the balance between spending too much on legacy and not enough on investing for the future.”

Cost-cutting initiatives mean the department has de-prioritised maintenance work and system upgrades in the past, the report further stated, that now mean its IT systems “constitute a significant risk” to the organisation.

The report specifically pinpoints the “data and technology infrastructures” underpinning the systems used to process self-employed taxes as an acute area of concern, as these systems have not “kept pace with developments since they were put in place in the mid-1990s”.

To address this, HMRC told the Committee it plans to pursue new funding opportunities to bankroll the modernisation of its IT systems, having already secured £268m in government funding for this task through the November 2020 Spending Review.

Read more about HMRC and its digital programmes

The organisation has also received a commitment from the government to provide it with around half a billion pounds to support its ongoing Making Tax Digital initiative, which is geared towards digitising the entire UK tax system.

“It remains to be seen whether this is sufficient to urgently address the long-standing issues the department has identified,” the PAC report added.

Particularly as the report goes on to say that readying its operations for the increased workload the Covid-19 coronavirus pandemic has inflicted on HMRC has resulted in increasing the Department’s IT costs by £53.2m.

“The demands created by the pandemic have put a huge strain on HMRC’s day to day operations and the pandemic has had a significant impact on HMRC’s performance, in terms of, for example, falling tax revenues, poorer customer service, reduced compliance activity and increased debt balances,” the report continued.

Along side this, the organisation is still in the midst of delivering on its ambition – set out in 2015 – to “become one of the most digitally advanced tax administrations in the world”, while also readying its systems and processes for the fallout from the UK’s exit from the European Union.

In respect of its 2015 goal, the Department said it has made some progress on this front, given that 22 million people are now in possession of an online personal tax account. “The pandemic has significantly increased HMRC’s workload and its complexity. The Department will need to review whether it has the resources and capacity to deliver on all of its commitments,” the report concluded.

Computer Weekly contacted HMRC for a comment on the report's findings, and was supplied with the following statement from a Departmental spokesperson.

“The government has done all it can to help as many people as possible, providing support worth more than £280 billion and adapting our schemes to include as many people as possible – for example, by extending the cut-off date for the Coronavirus Job Retention Scheme, bringing in more than 200,000 employees to the scope of the scheme. HMRC delivered COVID-19 support schemes at unprecedented speed, protecting the livelihoods of millions of people," the spokesperson said. 

“We do not underestimate the challenges faced by individuals and businesses during the pandemic, and our top priority is getting financial support to those struggling with the economic, while protecting the taxpayer against fraud."

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