HM Revenue & Customs more than tripled the pay of a key architect of its controversial new PAYE system to stop him walking out at a crucial moment, it was revealed today.
A package worth £600,000 a year pro rata was agreed to keep Deepak Singh as Acting Chief Information Officer (CIO) for an extra three months after he failed to land the post permanently.
Mr Singh was also handed more than £19,000 as a benefit in kind for "employment counselling" to help him find another job.
The generous deal was highlighted as the Public Accounts Committee took evidence from HMRC chief executive Dame Lesley Strathie.
It is likely to infuriate more than a million people who have been hit with unexpected demands for hundreds of pounds in back-tax due to delays in implementing the new PAYE system.
Mr Singh was on a fixed-term contract when he was promoted to acting CIO in October 2007, with responsibilities including the IT upgrade.
He applied unsuccessfully to get the job permanently early last year. However, the winning candidate, Phil Pavitt, was not available to start immediately.
Mr Singh's services between the end of his contract on June 19 and September 18 were secured by HMRC paying his firm Orwell Consulting Ltd £149,500.
That is equivalent to just under £600,000 a year - compared to his previous salary of £160,000-165,000.
Mr Singh also received a benefit in kind of £19,200 to help him find another job afterwards.
Asked by Tory MP Richard Bacon why Mr Singh was granted such terms when the end date of his contract had been known for three years, Dame Lesley replied: "Basically, to de-risk the implementation of (Modernising PAYE Processes for Customers phase three) and to deliver a very large commercial renegotiation of our contract with Aspire.
"He was recruited on a fixed term contract and roughly halfway through that contract he was temporarily promoted to director general and CIO in HMRC."
Dame Lesley said there had been a "fair and open" competition for the permanent post, and Mr Singh lost.
"Very simply, he knew that he wasn't getting the job, he knew there was a new CIO coming, he knew there was a massive programme to land. We had the commercial negotiation," she said.
"He was not interested in another short term contract on the same basis."
Dame Lesley added: "This was fairly unique, we did it within our rules, and the balance for me was being left without a CIO for the period, or asking Mr Singh to strike a deal to cover the three month period when the contract ended, which would cover my negotiation on the reduction of the six-month contract of his successor."
She went on: "One of our choices would have been to go to market to try to find an interim. It would not have been any cheaper. They would also have been starting from a low knowledge base.
Pressed on whether the £19,200 benefit in kind for "outplacement services" meant "employment counselling" and help with finding a new job, Dame Lesley said: "It means that."
The MPs also heard that less than a fifth of the 1.4 million taxpayers who have been told they owe money from 2008-9 and 2009-10 are likely to get the sums written off.
Under a policy known as extra-statutory concession, debt can be cancelled if it has been caused by HMRC errors.
But Sarah Walker, the Revenue's director of PAYE, self-assessment and national insurance said: "It is quite a small proportion - I think we would say it is less than 20% - and then of those, a proportion then will claim the concession and we will then write it off."Reuse content