HMRC is poised to take on new suppliers next month to replace its mega £10bn Aspire IT contract with Capgemini and Fujitsu – the system underpinning £500bn of annual tax revenues.
In a statement, the department said it "expects that the contracts will be of interest to smaller and medium-sized companies, as well as the larger providers."
Under the agreement HMRC will complete the phased exit from a single, overarching IT contract by breaking it into to a series of smaller deals with existing and new suppliers.
That means some of the new contracts will begin before the final end date of 2017.
In 2015 HMRC hired consultancy firm Bain at a fee of £20m to help plan its exit strategy from Aspire. The contract currently soaks up 84 per cent of the department's ICT budget.
However, MPs have warned the system, which the government cannot afford to go wrong, could be too risky to change.
HMRC reckons its approach of signing up smaller suppliers will help it deliver "ground-breaking digital strategy by taking advantage of emerging technologies such as open-source software and cloud services."
HMRC has already made moves to bring some existing IT services and staff in-house before the end of the contract next year. It expects to save around 24 per cent (£200m) a year by 2020-21 on the provision of like-for-like IT services, against a £854m total IT spend in 2014-15.
The department is also throwing £1.3bn to make its tax systems more digital over the five years.
Lin Homer, HMRC’s chief executive, said the agreement with Capgemini and Fujitsu will bring it closer to its aim of becoming "the most digitally-advanced tax authorities in the world."
She said: "Our new approach enables HMRC to secure the adaptable, cutting-edge IT services we need to transform our services to customers and modernise the way we work, at much better value for money for the taxpayer.” ®