Currently, EDS provides IT services for the Revenue's tax activities, including PAYE (employement tax), and Accenture (formerly Andersen Consulting) supports the National Insurance Contributions (NICS) system following its transfer from the DHSS in 1999. Both companies have suffered cost over-runs and systems failures.

The Revenue says it faces significant strategic challenges in its delivery of services to the public and Government, and its IT partners will play a crucial role.

Nick Montagu, the Revenue's Chairman said:

"The Inland Revenue faces changes on an unparalleled scale and on all fronts - policy, compliance, customer services and expectations, the integration of new businesses and the use of new technologies to deliver our services.

Our challenge, and that of our partners, is to find ways to transform our business to meet these demanding and exciting times.

Our IT partner, beyond 2004, will play a major part in changing our business and we are therefore looking for the right partner with the right skills to deliver our aspirations. This competition will be vital to the future success of the Inland Revenue."

The precise scope of the tendering process is still being developed but, says the Revenue, it is likely to encompass the bulk of the services currently provided by EDS and Accenture under the existing contracts. Surprisingly, given strong pressure on the Government to simplify the UK's employment taxation system by merging PAYE and NICS, there is not even a hint of this in the tendering document.

The Inland Revenue's attempts to modernise its IT systems could fairly be called a poisoned chalice for the private firms that have become involved; it will be a brave company that tenders for the new contract.