‘Taking more control of IT strategy’ – HMRC reveals plan to close in-house tech firm RCDTS

Staff will either become civil servants or move over to commercial providers

Credit: Howard Lake/CC BY-SA 2.0

HM Revenue and Customs is to close its in-house IT provider RCDTS Ltd and intends to take “more control of IT strategy and estate”.

Employees of the government-owned company will either be transferred into the department, thus becoming civil servants, or to a commercial provider. External transfers will take place under TUPE regulations.

The aim is to close the company – the full name of which is Revenue and Customs Digital Technology Services Ltd – by the end of the 2022/23 fiscal year in 14 months’ time.

No redundancies are planned as part of the closure and HMRC said that it is “committed to full and open consultation with colleagues and all affected parties, as well as supporting our people through any potential change”.

The department added that, rather than “workforce efficiencies”, the intention behind the closure is to create “an IT organisation and partnerships that enable HMRC to make the most of new technology to improve services for customers”.

A spokesperson for the tax agency said: “To support improved services for all our customers, HMRC is taking more control of its IT strategy and estate, ensuring we have the right capabilities in house, supplemented by buying in standardised IT services from a more diverse range of partners. We’ve announced to employees RCDTS Ltd, a company set up and wholly owned by HMRC, that they will either transfer into HMRC, enhancing our in-house technical capability, or move with their work to commercial partners where they will continue to support the department. Once these moves are complete, we plan to close the company by March 2023.”

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The most recent set of annual accounts showed that, as of the end of March 2021, the tech firm’s number of full-time employees stood at 786, an increase of 27 compared with the prior year. There were also 163 contractors on the books, almost 50 more than there were as of March 2020 – taking the total headcount to 949.

During the year, HMRC spent £80.9m on the delivery of services provided by RCDTS. This represents an increase of £9m compared with FY20m, reflecting the requirements placed on the department to deliver a range of major digital projects in support of government’s coronavirus response – in addition to the ongoing demands of Brexit, in particular the UK’s new customs IT system.

The decision to close the in-house tech firm comes as HMRC proceeds with the implementation of the Technology Sourcing Programme, a long-term project to manage the department’s exit from several major IT supplier contracts, transform its procurement and delivery strategy for £900m of tech spending each year, and work with a greater range of providers, including more SMEs. 

In the three-year spending review conducted in November, HMRC received £277m to support its work over the next three years on transforming IT procurement. The review also committed a sum of £468m to help the department “reduce the risk of system failures, enhance the department’s ability to defend against cyberattacks, and support the continued digitisation and modernisation of the tax system”.

This followed a sum of £268m awarded in the one-year spending round of 2020 to help HMRC urgently address issues with legacy IT. That funding came during a year in which necessary maintenance of ageing technology resulted in £53.4m of additional costs – equating to 80% of all the additional expense incurred by the department as a result of the demands placed on it by the early months of the coronavirus response.

Transfer talk
On Thursday at 1pm, the Public and Commercial Services union is hold an open virtual meeting for all members – including RCDTS employees as well as those from HMRC’s internal digital and IT functions – who will have the chance the discuss the planned closure and the implications for staff.

The union also claimed that it has not thus far been “to assist RCDTS members facing… a TUPE transfer out of RCDTS… [which] instead expects inexperienced and relatively untrained ‘Employee Forum’ members to handle the impact of complex employment legislation”.

“PCS, and our sister union ARC, are continuing to press HMRC, calling on them to redeploy within the department, any staff who do not wish to transfer to the private sector,” the union added. “Following the department’s apparent move away from this approach, as recently as December 2021, PCS and ARC wrote to HMRC to reinforce this fundamental demand.”

RCDTS was established in 2015 as a government-owned company with a single customer: HMRC. The creation of the firm came as the tax agency began the process of extricating itself from major long-term outsourced IT contracts.

Its planned closure comes 15 months after the Department for Work and Pensions announced that it would be closing its dedicated IT firm BPDTS Ltd – which had the same ownership structure and remit as its HMRC equivalent. In that instance, the company was entirely merged with the DWP’s internal IT and digital unit, with BPDTS staff transferring to the civil service.


Sam Trendall

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