HMRC plans £2bn technology spending spree as legacy systems prove stubborn

HM Revenue & Customs is preparing to embark on a technology spending programme worth more than £2 billion over the next two years, as long-running efforts to modernise its ageing IT estate continue to run into delays and rising costs.

According to HMRC’s latest procurement pipeline, the tax authority will begin with a large-scale data warehouse transformation programme, expected to be worth around £410 million. The contract will combine the running and modification of existing systems with the migration and eventual decommissioning of legacy data warehouse platforms.

Procurement documents state that HMRC intends to award a single contract to deliver the transformation of its legacy data warehouses, replacing no existing agreement. The legacy technology is widely understood to include SAP’s ECC Business Warehouse, which sits at the centre of HMRC’s wider enterprise resource planning overhaul.

SAP has already secured major uncontested contracts with HMRC, including a £246 million ERP modernisation deal and a separate £275 million upgrade to core tax systems, both awarded without a competitive tender.

One of the largest upcoming procurements is a £350 million contract for public cloud computing services with Amazon Web Services, replacing an existing AWS agreement of the same value. The pipeline also highlights a £306 million contract for “Digital Platforms Run and Change Products”, covering IT services to support live application services, including legacy platforms. This would replace a contract awarded to Accenture in May 2024, also valued at £306 million.

Beyond these headline projects, HMRC has a further series of large procurements planned, each exceeding £200 million. These include a £250 million mobility and workplace services contract to support staff devices and helpdesk functions; a £250 million deal for digital platforms supporting systems such as the Government Gateway and customer insight tools; and a £220 million data centre services contract.

Another significant agreement is the £214 million “Legacy – Retained HMRC Services Contract”, which HMRC has flagged as a direct award. This will replace the existing Core Business Platform Support and Maintenance Services contract, previously awarded to Capgemini for £214.5 million without a competitive process. That deal was later extended, again without competition, by a further £107 million.

In the 2024–25 financial year, HMRC spent £1.16 billion on IT and telecommunications while collecting £858.9 billion in tax revenues. Under the government’s most recent Spending Review, departments were required to undertake a Zero-Based Review of budgets, with a strong emphasis on digital transformation. As a result, HMRC has been allocated an additional £1.6 billion between 2026–27 and 2028–29 specifically to modernise its IT and data infrastructure.

However, the National Audit Office has warned that progress has been slower and more expensive than anticipated. In a report published in November 2025, the NAO said HMRC was taking longer than planned to exit legacy systems and had yet to realise the expected efficiency gains from its digital services programme.

“HMRC has not yet achieved the anticipated efficiencies from its digital services,” the watchdog said, raising questions about value for money as spending continues to escalate.

A spokesperson for HMRC said: “We’re investing in new technology so we can provide better services for our customers. We follow government procurement rules when awarding these contracts to ensure value for money for taxpayers.”

With billions more set to be spent on technology modernisation, pressure is mounting on HMRC to demonstrate tangible improvements in efficiency, service quality and system resilience as it attempts to finally move away from decades-old infrastructure.

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HMRC plans £2bn technology spending spree as legacy systems prove stubborn