PAYE system not ready for rollout

The launch of a computer system to handle all PAYE tax claims has been suspended because of fears it will not be able to cope.

HM Revenue & Customs (HMRC) postponed the PAYE system because of uncertainty over whether it was ready to oversee the collection of taxes from about 31 million people.

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The system to bring individual PAYE details together on one network had been due to go live in October this year but no new date has been set for its launch.

One of the key findings of the Poynter Review into HMRC data handling was duplication of information in the HMRC's 650-plus systems increased the risk of data loss.

Bernadette Kenny, director general of personal tax at HMRC, said in a statement: "Ensuring that our customers are properly served by our PAYE services is of paramount importance to us but we will not go ahead with implementing the new system until it is completely ready."

Earlier this year a report found HMRC computer systems had incorrectly taxed up to five million people.

The suspension of the system comes as a report from the National Audit Office revealed HMRC had spent £552m on IT transformation between 2006 and March 2008.

The figure is two-thirds of the £851m the HMRC has spent so far on a programme to modernise tax collection, with savings of about £2.4bn achieved since the programme began, according to the report.

HMRC expects the £2.7bn transformation programme, which will run until 2011, to deliver most benefits from an increased tax yield, estimated at £6.3bn, and from transaction savings of £4.1bn.

The report also reveals HMRC revised its Aspire IT services contract with Capgemini to help meet targets to cut IT running costs by 10 per cent by 2010-11.

The contract has been extended by three years to 2017 and under the revised contract Capgemini has agreed to provide savings of £658m.