HMRC Is About to Spend Billions on Technology But Money Alone Won’t Fix the Problem

There is a comfortable myth in public-sector technology: that enough funding, applied at sufficient scale, will eventually modernise anything. HMRC’s current investment trajectory puts that belief to the test.

With multi-billion-pound commitments across applications, infrastructure, and services over the next two years, HM Revenue & Customs is positioning itself as one of the most significant technology buyers in Europe. The opportunity for the market is real and sizeable. But so is the risk that this becomes another expensive attempt to correct structural problems that money alone cannot resolve.

What matters now is not how much HMRC plans to spend, but how intelligently it deploys procurement power and how honestly the supply market responds.

A Buyer With Scale and With Scar Tissue

HMRC’s scale is often quoted, but rarely examined. Collecting more than £900bn annually and operating national tax, customs, and border systems means its technology estate is not merely large  it is politically exposed, operationally brittle, and historically constrained.

Decades of incremental outsourcing, platform layering, and contract-driven architecture have produced an estate that is expensive to run and hard to change. The current push toward cloud platforms, SaaS, data services, and AI is not optional modernisation; it is an attempt to restore manoeuvrability.

Recent supplier engagement activity simply confirms what was already evident: HMRC is using procurement as a corrective instrument, not a neutral buying function.

That distinction matters because corrective procurement is unforgiving.

The Opportunity Is Huge and Concentrated

From a market perspective, HMRC’s forward pipeline is unusually clear.

On the applications side, an estimated £2.3bn pipeline over the next 18–24 months is expected to flow into enterprise tax platforms, case and document management, integration and API layers, legacy modernisation, and AI-enabled data services. These are not peripheral tools; they sit at the operational heart of how tax is assessed, collected, and disputed.

On infrastructure, the scale is even larger- approximately £3bn over two years, driven by data-centre exit, cloud migration, cyber security (including SIEM and assurance services), network modernisation, modern workplace services for over 60,000 staff, and a shift from traditional data warehousing to lakehouse architectures.

Add to this professional services demand particularly for Borders and Trade delivery, large-scale transformation programmes, and delivery assurance and the picture becomes clear: HMRC is not buying experiments. It is re-platforming itself.

For suppliers, this is a once-in-a-cycle opportunity.
For HMRC, it is a moment where failure would be both expensive and visible.

Procurement Reform: Necessary, But Not a Silver Bullet

HMRC’s growing use of flexible procurement approaches enabled by the Procurement Act is directionally right. Multi-stage competitions, dialogue, and funded innovation reduce the risk of locking into the wrong solution too early.

But flexibility cuts both ways.

The danger is not under-specification; it is over-optimism. Complex legacy transformation especially at HMRC’s scale has a habit of absorbing supplier enthusiasm and returning delivery reality. Flexible procurement must still converge on hard architectural decisions, enforceable commercial accountability, and credible exit strategies.

Innovation-led routes, show promise. But pilots that scale cleanly remain the exception. The real test will be whether HMRC resists turning successful prototypes into bespoke solutions that recreate dependency under a different name.

SMEs: Opportunity or Instrument?

Mandated SME participation targets and innovation pathways are often framed as progressive reform. In practice, they are also a hedge against concentration risk.

HMRC’s insistence on 20–30% SME involvement on major contracts reflects a belief that monolithic supply chains are brittle. A more modular ecosystem spreads risk but increases coordination complexity.

For SMEs, the opportunity is genuine but conditional. Financial resilience, security accreditation, tax compliance, accessibility, and delivery maturity are no longer optional thresholds. The romantic idea of the nimble disruptor does not survive contact with HMRC’s governance environment.

For prime contractors, the challenge is sharper still: superficial SME inclusion will not withstand scrutiny. Partnership models will be judged on delivery substance, not bid narratives.

The Quiet Hardening of Non-Negotiables

If there is one area where HMRC’s posture has hardened, it is around what cannot be traded off.

UK data sovereignty, security assurance, accessibility compliance, and AI governance are now treated as entry conditions, not evaluation criteria. Suppliers who frame these as constraints on innovation are misreading the moment.

This reflects institutional memory shaped by past failures across government, where innovation outran governance. HMRC appears determined not to repeat that mistake, even if it slows procurement or narrows supplier choice.

That restraint deserves credit. It also raises the risk that the market focuses more on compliance theatre than on delivery capability.

What This Actually Means for Citizens

For all the discussion of platforms, pipelines, and procurement reform, none of this matters unless it changes outcomes for citizens. People do not experience cloud migration; they experience tax codes, repayments, penalties, and disputes often at moments of financial stress.

If HMRC’s £2.3bn investment in applications and data platforms is implemented well, citizens should see faster and more accurate decisions. Better integration between systems means fewer errors caused by mismatched data, fewer requests for the same information, and fewer cases stuck between departments. Automation, used properly, should reduce processing times for refunds, benefits adjustments, and compliance checks.

For small businesses, the impact could be transformative. Modern case management and real-time data services should mean clearer visibility of liabilities, quicker resolution of queries, and fewer costly delays that quietly drain cashflow. In that sense, large-scale technology spend becomes an economic policy lever reducing friction in the system rather than simply enforcing it.

The £3bn infrastructure investment matters here too. Resilient cloud platforms and modern networks are not abstract upgrades- they are what prevent system outages during filing deadlines, reduce service downtime, and allow HMRC staff to respond flexibly during crises. Citizens only notice infrastructure when it fails and that failure is disproportionately felt by those least able to absorb it.

But the risks are equally real.

Large transformations externalise their failures. Backlogs become the citizen’s problem. Poorly governed automation becomes unchallengeable decision-making. AI systems that cannot explain outcomes undermine trust particularly when decisions affect income, benefits, or penalties.

Accessibility is another fault line. Digital-by-default services promise efficiency only if systems are genuinely inclusive. If modern platforms assume digital confidence, constant connectivity, or complex self-service journeys, then investment risks widening inequality rather than reducing it.

Ultimately, citizens do not care whether HMRC buys “best-in-class” technology. They care whether it uses technology to be fairer, clearer, and more humane. Procurement decisions that privilege speed over accountability, or innovation over comprehension, will be felt far beyond government in household finances, business survival, and confidence in the tax system itself.

This is the standard against which all this spending should be judged.

Social Value: Signal or Substance?

Social value is now a material differentiator in HMRC competitions. In tightly scored procurements, it will influence outcomes.

The risk is familiar: commitments that look strong on paper but sit orthogonally to delivery reality. HMRC’s preference for contract-specific, measurable outcomes is sensible but enforcing that discipline over multi-year programmes is harder than scoring it at bid stage.

Suppliers should assume scrutiny will increase. HMRC should assume the same.

The Final Test: Can HMRC Buy Its Way Out of the Past?

HMRC is about to discover something few public institutions ever test at this scale: whether a buyer with enough money, enough policy cover, and improving procurement tools can actually change the behaviour of its supply market rather than be reshaped by it.

The danger is not that HMRC spends too little or moves too slowly. The danger is that it spends decisively, procures “correctly”, and still reproduces the same outcomes dependency, opacity, and fragile delivery under newer labels and cleaner architectures.

Many of the suppliers best placed to win the next generation of contracts are also those that benefited most from the last. If transformation once again depends on proprietary platforms, asymmetric knowledge, and exit strategies that exist only on paper, then nothing fundamental has changed.

The real question is not whether HMRC can modernise its systems. It almost certainly can.

The question is whether it can change the power balance that has historically governed how government technology is delivered and whether the market is willing to meet a buyer that is trying to purchase independence rather than convenience.

If this round of investment does not achieve that, then the problem was never funding, frameworks, or procurement law.