£75m IT bill for Customs and Inland Revenue merger

The merger of HM Customs & Excise and the Inland Revenue will cost an initial £75m over the next two years, with a large chunk taken up by the IT integration.

The government has formally published the Commissioners for Revenue and Customs Bill today, which sets in place the legislative framework for the new HM Revenue and Customs department.

The integration of the two departments is a result of the O'Donnell review, which said it will contribute to government efficiency savings targets by cutting 3,200 full-time jobs by the end of financial year 2007/2008.

The Treasury's regulatory impact assessment of the cost of the merger said: "The known costs that arise directly from the creation of HM Revenue and Customs are anticipated to be of the order of £75million over 2004/05 and 2005/06, including the preparatory costs of alignment of basic services, such as work to put the future IT desktop requirements of the departments on a common platform."

It warned further costs from integration may arise later from changes to join up some of the services the two departments currently provide to business customers independently.

Steve Lamey, former IT chief at BG and BOC was appointed as the new CIO for the merged department back in September. He will take up his post once the Bill has passed through Parliament.

Former Inland Revenue IT director John Yard, who was in charge of the department's £3bn Aspire outsourcing deal with Capgemini, said in an earlier interview that flexibility had been built into the agreement to take into account the merger.

"There are a set of workstreams around the merger, one of which is IT. The integration of IT is going to be key to this and we are working through looking at what options might be," he said.