ITNet suffers Hackney effect

ITNet is writing off deferred costs on its long-term contracts and will be taking revenue and costs as incurred. This will mean taking a hit on pre-tax profit of £10m this year and £15m for previous years.

The company had been working on a 10-year, £70m contract to upgrade and run the financially chaotic council's revenue and benefits system. The two parties are in negotiation over service levels with the council threatening to terminate the contract.

Anne Pickup, spokeswoman for ITNet, said: "This accounting change will not have a negative impact. We will be due substantial amounts of tax back."

In September, ITNet reported half-year turnover up 24 per cent at £75.7m and operating profits up 22 per cent to £4.9m.