Legacy systems running UK's collector are taxing – in more ways than one

Costs for fixing them and keeping them working up by 390%, NAO report reveals

Updated Costs associated with the remediation of the UK tax collector's legacy systems have risen by up to 390 percent, according to a new report from government auditors.

His Majesty's Revenue & Customs (HMRC) has estimated IT-related costs associated with major tax-related digital change programs to be £482 million ($598 million) in 2023-24.

Three of HMRC's eight most costly tax-related digital programs in 2023-24 involved remediation of legacy systems. By March 2023, these programs had seen whole-life costs increase by between 60 percent and 390 percent, with their life extended by between 21 months and 36 months as their scope changed, the National Audit Office (NAO) said.

In its report, "The administrative cost of the tax system," the spending watchdog said that one of the programs, dubbed Securing our Technical Future (SOTF), included migrating HMRC's critical IT services onto new platforms. The program has now closed, but has "cost more than initially expected and has underdelivered due to unforeseen technical complexities and some funding in 2023-24 being moved to higher priorities."

As of March 2024, 372 of 545 services had been successfully migrated and 49 had been remediated, leaving 124 legacy systems still in place.

"HMRC does not track how much of its digital costs are incurred maintaining and updating legacy tax systems, some of which are over 30 years old," the NAO said.

In 2020, the NAO reported that cost-cutting at HMRC resulted in IT systems that "constitute a significant risk to the department."

In his write-up of HMRC's annual report and accounts (PDF), NAO comptroller and auditor general Gareth Davies said: "HMRC has recognised that, due to the need in the past to forgo operational maintenance and upgrades to its systems to secure cost savings, its IT systems now constitute a significant risk to the Department."

The HMRC annual report for fiscal 2020 said SOTF was formerly known as Columbus Cloud, itself designed to replace the controversial Aspire program, which was signed in 2004 and jointly contracted Capgemini, Fujitsu, and Accenture as suppliers in the £10 billion ($12.4 billion) agreement, which officially ended in 2017.

"This [SOTF] programme is focused on remediating high-priority technical debt and migrating our services out of existing data centres. However, it is acknowledged that there remains significant work to do if we are to address the levels of technical debt identified across the estate and create a more flexible, secure and scalable IT environment," HMRC's annual report said.

In a letter to the chairman of Parliament's Public Accounts Committee, Sir Geoffrey Clifton-Brown, HMRC chief executive Jim Harra said in November last year that digital programs had been hit by unexpected additional costs, "notably within the SOTF Program, due to enablement work that proved to be more complex than originally understood."

Costs for SOTF rose from projected estimates of £312 million ($387 million) in 2018 to £437 million ($542 million) in January 2024, he said. ®

Updated to add on Feb 11th

An HMRC spokesperson conceded that it had "formally" closed the Securing our Technical Future program last year, but said the tax collector was "committed" to exiting its legacy datacenters and building "a modern IT estate." The spokesperson added: "Technology programs are a key priority and we're continuing to invest in our technology roadmap. This will enable us to provide even better digital services of the standard our customers rightly expect."