HM Revenue & Customs is preparing to launch a technology spending program worth more than £2bn over the next two years as long-running efforts to modernize its aging IT estate continue to run into delays and rising costs.
According to HMRC’s latest procurement pipeline, the tax agency will embark on a large-scale data warehouse transformation program expected to be worth around £410 million. The contract covers the operation and modification of existing systems with the migration and possible decommissioning of older data warehouse platforms.
The procurement documents state that HMRC intends to award a single contract for the transformation of its legacy data warehouses and not to replace an existing agreement. This legacy technology is widely considered to include SAP’s ECC Business Warehouse, which is at the heart of HMRC’s wider overhaul of enterprise resource planning.
SAP has already secured large, uncontested contracts with HMRC, including a £246m ERP modernization contract and a separate £275m core tax systems upgrade, both of which were awarded without tender.
One of the biggest upcoming procurements is a £350m public cloud computing services contract with Amazon Web Services, replacing an existing AWS contract of the same value. Also in the pipeline is a £306m Digital Platforms Run and Change Products contract, which covers IT services supporting live application services, including legacy platforms. This would replace a contract awarded to Accenture in May 2024, also worth £306 million.
Beyond these key projects, HMRC has planned a further series of large procurements, each worth more than £200 million. These include a £250m mobility and workplace services contract to support staff devices and helpdesk functions; a £250m deal for digital platforms that support systems such as the Government Gateway and customer insights tools; and a data center services contract worth £220m.
Another significant agreement is the £214m 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 on a non-competitive basis for £214.5 million. This deal was later extended, again without competition, for a further £107 million.
In the 2024-25 financial year, HMRC spent £1.16 billion on IT and telecoms while generating tax revenue of £858.9 billion. As part of the government’s recent spending review, departments were required to undertake a zero-based review of budgets, with a focus on digital transformation. As a result, HMRC has been allocated an additional £1.6 billion between 2026-27 and 2028-29 specifically to modernize its IT and data infrastructure.
But the National Audit Office has warned that progress is slower and more expensive than expected. In a report published in November 2025, the NAO said HMRC was taking longer than planned to phase out legacy systems and had not yet realized expected efficiency gains from its digital services program.
“HMRC has not yet achieved the expected improvements in efficiency with its digital services,” the regulator said, raising questions about value for money as spending continues to rise.
An HMRC spokesman said: “We are investing in new technology so we can provide better services to our customers. When awarding these contracts we follow government procurement rules to ensure value for money for taxpayers.”
As billions more are set to be spent on upgrading technology, pressure is growing on HMRC to deliver tangible improvements in efficiency, service quality and system stability as it attempts to finally move away from decades-old infrastructure.
