The Government's flow of tax revenues could be jeopardised if HM Revenue and Customs fails to secure agreement on a new IT contract, the Whitehall spending watchdog has warned.
The National Audit Office (NAO) warned that time was running out for HMRC to put in place a replacement for its multibillion-pound Aspire contract - the Government's largest technology contract - which expires in less than three years.
The NAO was also highly critical of HMRC's management of the current contract with Capgemini which is now expected to have cost £10.4 billion by the time it runs out in June 2017 - more than double the £4.1 billion projected when the contract was first let in 2004.
It disclosed that Capgemini and its subcontractor Fujitsu had already made profits of £1.2 billion on the deal - more than twice the £500 million originally forecast.
Despite the complexities involved in agreeing a replacement, the NAO said that HMRC had yet to produce a business case or full project plan and had still not fully quantified resources it required or capability gaps it needed to bridge.
It said that if a new programme was not in place by June 2017, it could result in a "severe impairment" of HMRC's ability to modernise its tax collection processes and could ultimately put the amount of tax collected "at risk".
Margaret Hodge, the chair of the Commons Public Accounts Committee which oversees the work of the NAO ,said HMRC's management of Aspire had been "unacceptably poor" and questioned its ability to put in place a successor.
"It is deeply depressing that once again a government contract has proved better value for the private companies involved than for the taxpayer, with Capgemini and Fujitsu pocketing an incredible £1.2 billion in combined profits - more than twice the profit HMRC expected," she said.
"Its own lack of capability meant HMRC was over-reliant on providers' technical expertise, undermining its ability to act as an intelligent customer on behalf of the taxpayer.
"HMRC is planning to replace the Aspire contract in 2017, but its new project is still half-baked, with no business case and no idea of the skills or resources needed to make it work. All of this gives me little confidence that HMRC's senior team has the capability to manage large and complex contracts."
An HMRC spokesman said: " HMRC has one of the largest outsourced IT contracts in the world, enabling us to deliver a very wide range of services to more than 50 million customers.
"We are committed to delivering all this for the minimum cost to the taxpayer. As the NAO report recognises, the Aspire contract helped the department to collect almost £506 billion for the UK in the last year alone as well as improving services to customers.
"The NAO also recognises the progress that HMRC has made over the last two years in developing in-house technical skills, so that we are less dependent on external suppliers. For instance, we recently opened a new Digital Delivery Centre in Newcastle as part of our digital transformation programme.
"We will continue to improve the performance of the contract over the next three years."