EDS has agreed to pay £71.25 million to the government for failing to deliver on a tax credit IT system.

The agreement ends a claim from HM Revenue and Customs. Specific terms of the agreement were not announced, but the settlement includes an upfront payment from EDS and additional payments over time.

The company said in a statement it was pleased to settle the dispute without incurring the costs of what may have been a lengthy and complex legal case.

Customs sought compensation after problems with the Child Tax Credit and Working Tax Credits system implemented in April 2003. Through 2004, some £16 billion in tax credits were awarded to 5.7 million families, but as many as one third of those recipients were overpaid that year, according to a UK government report published in September.

It was estimated that the typical level of overpayment was between 10 percent and 14 percent, caused by both fraud and error, the report said.

EDS, based in Texas, provided IT services for HMRC under an outsourcing contract from 1994 through 2004. However, EDS still does other government work in the UK.

The company leads a consortium that was selected as a bidder in March for a £10 billion project to renew IT systems for the Ministry of Defence, one of the largest outsourcing projects the ministry has undertaken.