Merging Customs and Excise with the Inland Revenue will cost at least £75m, Her Majesty's Treasury announced yesterday. Most of the cost will be due to integrating the two department's IT systems.

The Treasury's Regulatory Impact Assessment (pdf) warns that the full cost could rise higher, if there are areas where the departments overlap. "These cannot be quantified until the associated policies have been agreed" it says.

"The known costs that arise directly from the creation of Revenue and Customs are anticipated to be to the order of £75m 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," the report goes on.

The new department, HM Revenue and Customs (HMRC), was proposed by the Chancellor Gordon Brown in March 2004, at the time of the last Budget. The O'Donnell review of revenue administration acknowledged that there would be some risks to "business as usual" during the transition period, but that strong management should be able to handle it.

The merger is expected to contribute 3,000 posts to the planned reduction of personnel throughout the department. The Spending Review earlier this year set a target of a head count reduction of 16,000 within HMRC by the end of 2008. ®

Related stories

Final bids in for MoD's £4bn IT project
More transparency will fuel egovernment
BMA tells doctors: avoid NPfIT's flagship project