UK tax collector plans £2B tech binge as legacy systems refuse to die

The UK's tax collector is budgeting to spend more than £2 billion on new tech deals in the next couple of years, including a contract set for AWS and another for Capgemini to be awarded without competition.

According to a spreadsheet of the procurement pipeline for this year and next, His Majesty's Revenue & Customs (HMRC) is starting with a data warehouse transformation program with a contract value estimated at £410 million. The document says: "HMRC intends to procure a single contract to deliver the transformation of its Legacy Data Warehouses (LDWs), combining existing run and change services with the migration and decommissioning of LDW platforms."

The planned procurement replaces no existing contract. The legacy technology in question is most likely to be SAP ECC Business Warehouse, according to an earlier framework order. SAP is at the center of an ERP overhaul worth £246 million to the German vendor, which also won an award to upgrade the tax system technology in an uncontested deal worth £275 million.

The cloud computing gold rush

The second-largest tech deal in the offing is for AWS Public Cloud Compute, with a value earmarked at £350 million. It is to replace an existing contract awarded to AWS for £350 million.

This continuity in cloud spending raises questions about whether HMRC is achieving the promised efficiencies from cloud migration. The tax authority has been on a multi-year journey to move services to the cloud, but the repeated large-scale contracts suggest either significant expansion of cloud usage or perhaps challenges in achieving the cost savings that cloud computing typically promises.

The Capgemini connection

The third in terms of estimated value is "Digital Platforms Run and Change Products," which asks for IT services to support application services including legacy live services. HMRC estimates this procurement will be worth up to £306 million. The winner will replace the current contract for "Award of Digital Platforms Run (Platforms and Products)," handed to Accenture in May 2024 for the same value.

However, the most controversial aspect of HMRC's procurement strategy involves Capgemini. The Legacy - Retained HMRC Services Contract worth £214 million is promised as a "direct award" and will replace Core Business Platform Support and Maintenance Services, which was awarded to Capgemini for £214.5 million without prior publication of a call for competition. The French outsourcer later saw that deal extended without competition for another £107 million.

When asked if the "direct award" contract means it will once again go to Capgemini uncontested, HMRC has not provided a clear answer, raising concerns about transparency and value for money in public procurement.

The scale of transformation

There are four more procurements in the pipeline for more than £200 million in the next couple of years:

• Mobility and Workplace services contract (support HMRC's devices including help desk for end users, £250 million)
• Digital Platforms Run and Change Platforms (IT services to support platform run applications for the Government Gateway, Multi-channel Digital Tax Platform, and Customer Insight Platform, £250 million)
• Data Centre Services (£220 million)
• Legacy - Retained HMRC Services Contract (£214 million)

The efficiency paradox

In 2024-25, HMRC spent £1.16 billion on IT and telecoms while collecting £858.9 billion in tax. In June's Spending Review, the government said departments would perform a Zero-Based Review (ZBR) of budgets, taking a "digital-first approach" and involving chief digital and information officers.

The result was that HMRC received an additional £1.6 billion from 2026-27 to 2028-29 to "modernize and reform HMRC's IT and data infrastructure," according to the National Audit Office (NAO), the public spending watchdog.

However, in November 2025, the NAO reported that HMRC is taking longer to get off legacy systems than it expected and costs are higher than predicted. "HMRC has not yet achieved the anticipated efficiencies from its digital services," it said.

This creates a troubling paradox: as HMRC spends billions on modernization, the promised efficiency gains remain elusive. Taxpayers will hope its performance improves as it continues to plow billions of pounds of their money into new tech deals.

The broader context

The scale of HMRC's IT spending reflects both the complexity of tax collection in a modern economy and the challenges of digital transformation in the public sector. The tax authority manages everything from individual income tax returns to complex corporate tax arrangements, requiring a vast and intricate IT infrastructure.

Yet the repeated reliance on major vendors like AWS and Capgemini, often without competition, raises questions about whether HMRC is building sustainable in-house capabilities or creating long-term dependencies on external providers. The "direct award" approach, while sometimes justified for speed or specialized expertise, can reduce competition and potentially lead to higher costs over time.

The £2 billion tech spending spree represents a significant investment in the UK's tax collection infrastructure, but its success will ultimately be measured not in the amount spent but in improved service delivery, reduced fraud, and more efficient tax collection for the benefit of public services.