EDS coughs up £71m for tax credit IT fiasco

EDS is to shell out £71.25m to the UK government to settle the dispute over problems with the IT systems developed to support the tax credit system.

Her Majesty's Revenue & Customs (HMRC) said it has negotiated a settlement of its claim for compensation "for problems experienced with the IT system developed by EDS to support the 2003 launch and subsequent operation of tax credits".

An "aggregate settlement" of £71.25m has been agreed, which will include an up-front payment and payments of additional amounts over time. No further details of the payments have been revealed.

The government department said: "HMRC believes this to be commensurate with EDS's responsibility for the IT problems which followed the launch of tax credits."

HMRC chairman, David Varney in a statement: "We have achieved a settlement of this complex dispute with EDS agreeing to pay compensation. The tax credits IT problems had an adverse impact on many tax credits claimants. We were determined to reach a fair settlement for the taxpayer, and I believe that has now been achieved."

Negotiations over the problems have been going on for several years, and HMRC recently renewed its threat to begin legal action against the supplier.

EDS UK, Ireland and Africa managing director Doug Hoover said in a statement: "We were always focused on reaching an equitable settlement. HM government remains a very important client for EDS and we are pleased that we have been able to settle this dispute without incurring the costs and uncertainties of what would have been a lengthy and complex legal case."