Legacy IT has accounted for 80% of additional expense, according to PAC

Credit: PA

The necessity of “patching up legacy systems” has added more than £50m to HMRC’s costs since the start of the coronavirus crisis, a report from the Public Accounts Committee has revealed.

The £53.2m the department has spent on necessary maintenance for its ageing IT infrastructure represents 80% of the total additional costs it has incurred as a result of the pandemic, PAC said. 

MPs on the committee acknowledged that, while the tax agency has made some progress in updating its tech estate, it needs to make further investments to avoid facing continued costs of maintaining ageing kit.

“HMRC has spent too much of its IT budget on patching up legacy systems rather than modernising them. The Covid-19 pandemic has shown the importance of an effective tax administration system. There is a strong case for investment in a modern IT system,” the report said. “HMRC says that it has made some progress in its ambitious digital transformation but is looking for opportunities to reduce the risks facing its IT systems so that they are kept up to date and safe from cyberattacks and catastrophic losses.”

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It added: “The department accepts it should redress the balance between spending too much on legacy systems and not enough on investing for the future.”

In the time between the HM Revenue and Customs providing evidence to the committee and the publication of its report, the tax agency was awarded £268m in the November spending round,

This money will help HMRC “to fix its outdated IT, to ensure its core systems are secure and support better administration”, according to PAC.

But MPs claimed that, even with this additional funding, “it remains to be seen whether this is sufficient to urgently address the long-standing issues the department has identified”.

The committee thus recommended that HMRC writes to PAC by the end of March “setting out what it is doing, and has planned, to refocus 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”.

Elsewhere, the report found that HMRC’s programme of reducing its number of offices and grouping staff in 13 regional hubs could be rendered “woefully out of date” in light of the events of the last year.

“It is commonly accepted that some significant changes in working practices, with more staff working flexibly and less need for traditional office space, are likely to be here to stay,” the report said.

The committee asked the department to set out how it might review its estate strategy “to ensure it can demonstrate value for money from its considerable investment”.