back to article HMRC's switch to AWS killed a small UK cloud business

UK cloud minnow DataCentred went under after HMRC – its largest customer – pulled the plug on a services contract in favour of a deal with Amazon, the corporation recently accused by MPs of tax avoidance. Manchester-based DataCentred signed an agreement with the UK tax authority two years ago via the G-Cloud framework: its …

  1. MyffyW Silver badge

    We'd be on HMRC's back if they stuck with a niche player at higher cost.

    Question: Given scale and predictable workloads based on long-established tax-cycle would HMRC not be better running their own datacentre kit?

    1. This post has been deleted by its author

    2. katrinab Silver badge

      Most people file their tax returns in the last week of January, so you do need to be able to scale up then.

      1. Warm Braw Silver badge

        Most people file their tax returns in the last week of January

        It's not beyond the wit of man to devise a scheme that would spread the load through the year. The HMRC could save considerably more money by devising taxation schemes that were easily automated, rather than putting out to tender the automation of the present labyrithine tax code.

        Perhaps the Treasury could show some of that "fxlexibility and imagination" they're demanding from Michel Barnier.

    3. AceRimmer

      I'm sure HMRC do run their own datacentre kit

      But for any large organisation, a hybrid of physical data centre kit and cloud provisioned services will give the most flexibility and resilience.

      HMRC see a peak every year when personal tax submissions are due. Keeping a number of extra servers on standby for 11 months for a 1 month peak would be stupid. Better instead to (automatically) spin up a number of cloud hosted servers for the short busy period. The extra capacity can be (automatically) switched off and forgotten about as soon as they are no longer needed. On premise kit can deal with the load for the rest of the year.

      1. Doctor Syntax Silver badge

        "The extra capacity can be (automatically) switched off and forgotten about as soon as they are no longer needed."

        And when that's done what happens to the sensitive personal financial data left on the storage devices? Is it left for the next customer to pick up of they do an od over their newly spun up devices or is it completely overwritten with junk? And if it's supposed to be overwritten who verifies this?

        1. anothercynic Silver badge

          @Doctor Syntax

          The machines are still in HMRC's buckets. Ultimately you'd expect those machines to pump the stuff they get fed directly into HMRC's systems at home base rather than 'store-and-forward-later'...

          Once they are destroyed, they *should* be overwritten with junk and reassigned. At least I'd expect *any* cloud provider (AWS, Google, Azure, OpenStack Providers X, Y and Z) to do that properly.

          1. Kiwi Silver badge

            Re: @Doctor Syntax

            Once they are destroyed, they *should* be overwritten with junk and reassigned. At least I'd expect *any* cloud provider (AWS, Google, Azure, OpenStack Providers X, Y and Z) to do that properly.

            One would expect it, yes.

            But can one guarantee it is done?

          2. davidcarboni

            Re: @Doctor Syntax

            I'd hope no one, gov or non-gov, is using anything other than encrypted storage.

        2. Kiwi Silver badge
          Pint

          And when that's done what happens to the sensitive personal financial data left on the storage devices?

          Surprised at the number of downvotes on this!

          Quite a reasonable concern that the data is going offshore, and we know that the best systems have failures, so highly sensitive data could be left around (even if there's a mandate the disks are physically destroyed, some (many?) will "wander").

          Have one of these to take your mind off the weird downvoters! (cue some more for my tally as well :) )

      2. P. Lee Silver badge

        >The extra capacity can be (automatically) switched off and forgotten about as soon as they are no longer needed.

        You can turn off the power to your own devices too, if you don't need them - it isn't against the law.

        With openstack you can at least move between providers. Using proprietary APIs is bad strategy, even if it provides savings at a tactical level.

      3. Anonymous Coward
        Anonymous Coward

        We're involved in that integration, and in a performance test a single one of our (not massive spec) physical boxes once took down the test Government Gateway (the old Microsoft cluster that took payment submissions etc) :) I think there are two or three of those boxes in total for all the tax submissions, which act as a buffer between submissions and processing. Really not that big a deal in terms of cost to keep them running all year round.

      4. macjules Silver badge
        FAIL

        I'm sure HMRC do run their own datacentre kit

        You'd think so, wouldn't you? No, HMRC Infrastructure Services need a GPS system in order to be able to find their rears with both hands. 5 years ago we were all being told by HM Treasury (as it was then), "No, you may not use AWS as they are subject to USA PATRIOT Act regulation".

        Looks like that's changed then. Of course all our tax details are perfectly safe and not being stored on an insecure S3 bucket at all ..

      5. Kiwi Silver badge
        Black Helicopters

        The extra capacity can be (automatically) switched off and forgotten about as soon as they are no longer needed.

        Just a thought.. What does that mean for data protection? I'd hazard a guess that people's tax (especially for businesses) is extremely sensitive information.

        Should it be going to a foreign government, especially one not exactly known for keeping its nose out of other people's business?

      6. LewisCowles1986

        Are you saying this business was only ever part of an on-ramp process whilst HMRC built in-house infrastructure, or that for a time they thought it was acceptable to pay a supplier for 12 months when they needed 1 month?

    4. This post has been deleted by its author

    5. Anonymous Coward
      Anonymous Coward

      "Question: Given scale and predictable workloads based on long-established tax-cycle would HMRC not be better running their own datacentre kit?"

      Excellent question, but often no, for a bunch of reasons.

      1) While predictable, HMRC workloads are extremely spiky. Self assessment being the canonical one, with 40% of submissions being done the day before the deadline. Likewise many processes are fundamentally batch, with huge once-a-month ETL and reporting jobs happening to drive much of the machinery of society. Last time I checked HMRC's average infra utilisation was on the order of 2% as a consequence.

      2) While for most organisations cloud is much more expensive than tin, for HMRC and most CGDs it's the opposite. Fujitsu's 'managed service' pricing scheme would make you cry with anger, and the lead times for new infrastructure are often quoted in the months or more. Absolutely kills any organisational agility.

      3) There are absolutely no in-house infrastructure skills, it all long-since having been pushed out to ICL/Fujitsu so it makes sense to buy as much of it as a service as is possible.

      Plus, frankly, for any modern organisation it just makes sense to at least have the option of using the utility clouds. Hybrid, multi-cloud strategies are emerging as the dominant pattern amongst the organisations I'm working with because they make loads of sense.

      1. J P
        Boffin

        HMRC load peaks

        While it doesn't affect any of the other aspects of the answers (and being able to transfer the "hardware risk" onto a 3rd party probably does make sense for HMRC), it is worth noting that long term HMRC are looking to flatten the SA filing spike with their MTD proposals - all business taxpayers are being moved to a scenario of quarterly updates in real time (which will in itself increase the average workload) meaning that for a fair proportion of them they'll have all the tax info ready to file for the year within a month of year end, ie by early May.

        The 31 Jan deadline will still be there (for those who have other affairs, or multiple trades with non-concurrent accounting dates) but will be less relevant in many cases.

        Separately for non-business taxpayers HMRC want everyone to manage things in real time anyway via their Personal Tax Account, and mechanisms like Dynamic Coding for PAYE and Simple Assessments for those with non-PAYE sources of income should reduce the number of full SA returns due on 31 Jan anyway.

        Note - although the Income Tax (ITSA) rules aren't mandatory, and won't be before April 2020 at earliest, HMRC are rolling out the underlying tech to VAT returns from April 2019. Unfortunately, what we don't yet know is how many businesses will be able to use the VAT transaction records to drive an income tax submission; but to the extent that they could, it'd facilitate earlier filing for ITSA.

        1. katrinab Silver badge

          Re: HMRC load peaks

          Unless you go for an Italian style 17 page Dichiarazione IVA, you are not going to be able to use it to calculate income tax liability.

          The Italians do arrange their affairs that way. It is an annual form, filing deadline is 28th February. It determines your VAT liability and your Income Tax liability. You still have everyone filing it in the last few days of February. If you make it a quarterly return, you have four peak days per year instead of one, but still the same number of people filing it on each peak day.

          When making tax digital comes in, you will still have to log into your account, check the pre-populated figures, add anything that is missing, and confirm that it is correct. It might make life easier for some tax payers, but the computer will have to do more work in retrieving all the figures from elsewhere, and people will still leave it to the last minute to do the confirmation.

          1. J P

            Re: HMRC load peaks

            You're quite right about the 4 peaks instead of one - the only real difference is it means you're using the capacity all the time instead of just once a year...

            As to the issues round using VAT (transaction based tax) info for ITSA or CTSA (profits based taxes) it'll depend on HMRC's cunning plan to get all "records kept and preserved digitally" and how well they can integrate that into the 3rd party software that HMRC apparently expect taxpayers to use in place of their current beloved spreadsheets. Since they can't practically outlaw the use of spreadsheets, the conversion rates to integrated packages will probably be lower than they'd like. As for those (800k or so) taxpayers who can't or won't use "technology" to communicate with the authorities, we're not quite sure what HMRC's plans are.

            In any event, the current draft ITSA regs set out reporting periods that are fundamentally incompatible with the vision of the MTD for VAT Legislation Overview to retain existing Prescribed Accounting Period rules for VAT. Until they sort that out, there's not that compelling a case to align your record keeping/submissions for the different heads of tax anyway - especially if they're not going to mandate any other MTD for Business until VAT has been shown to be a success. [Although that is 'shown to the satisfaction of HMRC & Ministers', which may not be the same thing as 'is']

          2. LewisCowles1986

            Re: HMRC load peaks

            Don't push for a damn quarterly return, it only benefits mega-corps. If I'm assessed per quarter it'd destroy my business and as a result I would turn to writing malware and attacking government and corporate infrastructure. The government has the table slid towards themselves on tax matters for normal people anyway, they need to punch the fat corporates in the mouth and start demanding their lunch money as well.

      2. patrickstar

        Isn't the sort of information handled by a tax agency potentially quite sensitive?

        What sort of cognitive mishap made them - and many others - think it's OK to run this on someone else's computers, shared with God-knows-who?

        Even if we ignore the whole issue of hypervisor breakouts and infrastructure compromise (especially Xen - as used by AWS - doesn't exactly have a stellar track record here), is there even ANY degree of control at all by the customer over who can actually access the servers and data?

      3. John Brown (no body) Silver badge

        "Last time I checked HMRC's average infra utilisation was on the order of 2% as a consequence."

        Maybe HMRC should be running their own cloud and selling off the the excess capacity to other government departments.

        1. Roland6 Silver badge

          >Maybe HMRC should be running their own cloud and selling off the excess capacity to other government departments.

          I thought that was the original idea behind G-Cloud, before the Cabinet Office realised why government departments ran their own IT...

          Also by having a third-party operating the cloud, it is harder for the civil liberty crowd to claim government departments are secretly sharing data...

          1. AMBxx Silver badge

            If HMRC want to smooth out their processing, all they have to do is offer discounts for early filing.

            My accountant gives a discount if we send everything in early. Gradually drops month by month. If you send stuff in January, you're paying quite a bit more.

          2. Anonymous Coward
            Anonymous Coward

            "I thought that was the original idea behind G-Cloud..."

            Nope. Never was, never will be. G-cloud is just a bad name for a standard pricing book available to all government bodies. Essentially it's a mechanism for the common boilerplate/qualification paperwork to be handled by CabO rather than every CGD doing it for every RFP.

          3. Kiwi Silver badge
            Black Helicopters

            Also by having a third-party operating the cloud, it is harder for the civil liberty crowd to claim government departments are secretly sharing data...

            Oh, they're sharing data alright. Only, it's with foreign organisations in foreign locations. Not exactly ideal!

      4. LewisCowles1986

        Short term, these strategies are amazing, but in the race to the bottom, everyone will be squeezed into a corridor of vendor-specific knowledge. If Amazon can keep that up for 2 decades, then they will have killed non-amazon offerings.

    6. Anonymous Coward
      Anonymous Coward

      Question: Given scale and predictable workloads based on long-established tax-cycle would HMRC not be better running their own datacentre kit?

      Good heavens, no, because then it would be too easy to see that they're handing off data to US agencies. By using Google and Amazon, that is all so much more covert - true automation at work.

      /cynic

    7. Anonymous Coward
      Anonymous Coward

      Niche player at a "High Cost"

      Let's put this into perspective. I am definitely not a math wizard, but if their revenue was £1.2 million in 2016, isn't 85% of it just over £1 million. Compared to what HMRC and many other government organisations spend on successful and failed IT projects, this doesn't seems expensive at all.

      1. LewisCowles1986

        Re: Niche player at a "High Cost"

        So the logic there is "You bought a Mercedez, might as well keep buying ford's as well because otherwise, you'll have to take a taxi?"

    8. scrubber
      Joke

      "would HMRC not be better running their own datacentre kit?"

      Why not just run it as hidden javascript on the browser of everyone who goes to the gov.uk website? Then it scales perfectly with increased demand for services.

  2. Anonymous Coward
    Anonymous Coward

    "However, The Register can reveal that six months ago the company was informed the tax collector would no longer use its services as it had revamped policy from being cloud agnostic to becoming an AWS fanbois"

    This isn't strictly true. What's changed is AWS and Azure now have environments rated to OFFICIAL and OFFICIAL-SENSITIVE on the G-cloud pricing book. That means they can now be used by central government departments.

    Previously Government was limited to niche, shockingly expensive players like this little lot and the likes of UKCloud and RedCentric. If you knew the amount of infrastructure involved in the >800k deal this now sadly departed minnow had you'd want to vomit with how stupid the pricing was.

    So it's not necessarily that the big boys are preferred (though DWP at least do have an aversion to Azure due to being burned by downtime), it's just that they're so much cheaper than everything else on the market that no one else is going to get a look in.

    And, frankly, should they?

    1. Anonymous Coward
      Anonymous Coward

      re: it's just that they're so much cheaper than everything else on the market

      Yeah, weird how not paying tax makes their offering cheaper....

    2. alain williams Silver badge

      How long UK before tax records taken by the USA

      What's changed is AWS and Azure now have environments rated to OFFICIAL and OFFICIAL-SENSITIVE on the G-cloud pricing book. That means they can now be used by central government departments.

      So what happens when the U.S.A. Supreme Court decides that law enforcement officials can access data on USA corporation owned servers in other countries ... how long before the USA slurps up all UK tax data on some pretext.

      1. Hans 1 Silver badge
        Facepalm

        Re: How long UK before tax records taken by the USA

        how long before the USA slurps up all UK tax data on some pretext.

        Do you really think GCHQ has not provided the data to the US already ?

        1. Anonymous Coward
          Anonymous Coward

          Re: How long UK before tax records taken by the USA

          Do you really think GCHQ has not provided the data to the US already

          Having been to GCHQ and met a couple of their guys, I'm pretty sure that Amazon's tech will provide the answers rather quicker than anything GCHQ could whip up :-)

      2. Anonymous Coward
        Happy

        Re: How long UK before tax records taken by the USA

        how long before the USA slurps up all UK tax data on some pretext.

        That depends on the download speed between Amazon's US data centre and the IRS's Compaq/386. Given American broadband speeds, I reckon about a decade.

      3. Roland6 Silver badge

        Re: How long UK before tax records taken by the USA

        how long before the USA slurps up all UK tax data on some pretext.

        Not sure if that really is the main reason to be worried; as a 'sovereign' state, I'd be more concerned about their ability to deny access to my data and hence the 'sovereign' government's ability to collect taxes.

      4. Anonymous Coward
        Anonymous Coward

        Re: How long UK before tax records taken by the USA

        how long before the USA slurps up all UK tax data on some pretext.

        You say that as if it's not already happening..

    3. Whitter
      Paris Hilton

      ...environments rated to OFFICIAL and OFFICIAL-SENSITIVE

      Are these environments really capable of meeting the GDPR requirements, or is it just the same fig-leaf as was/is used for Privacy Shield (or whatever its being called these days)?

      1. Anonymous Coward
        Anonymous Coward

        Re: ...environments rated to OFFICIAL and OFFICIAL-SENSITIVE

        "Are these environments really capable of meeting the GDPR requirements"

        It's a bit noddy, but GDPR places no requirements on environments, but on holistic business processes, of which the underlying environment is just one small piece.

        Government also plays by a slightly different set of rules when it comes to GPDR (e.g. they're not allowed to use Consent as a Justification).

        O/O-S are Information Assurance standards, which are different beasts entirely to data protection legislation.

    4. Pen-y-gors Silver badge

      What's changed is AWS and Azure now have environments rated to OFFICIAL and OFFICIAL-SENSITIVE on the G-cloud pricing book. That means they can now be used by central government departments.

      Counting down to the day we can buy all our tax records on t'darkwebs...

    5. Doctor Syntax Silver badge

      "What's changed is AWS and Azure now have environments rated to OFFICIAL and OFFICIAL-SENSITIVE on the G-cloud pricing book."

      Does this rely on the Privacy Figleaf? And let's wait & see what SCOTUS have to say that affects that.

    6. Anonymous Coward
      Anonymous Coward

      Of course this "UK cloud minnow" was more expensive - you can't compete with Amazon on price. What they did provide was strong customer support and maintained a great relationship with HMRC's cloud team.

    7. Anonymous Coward
      Anonymous Coward

      "Shockingly expensive"

      Not entirely true. Anybody who has used AWS at scale knows that you need a PhD to figure out the billing, which never even comes remotely close to what you initially had thought! Billing is so bad, that there are even companies that have been set up who help you understand your billing.

      But I believe you are missing the point of the article. In effect you are giving a whole bunch of tax money to a company that A) doesn't pay it's taxes because of complex arrangements (loopholes) in the law and B) It is widely known that Amazon doesn't treat its employees properly. So is this the type of company you want creating jobs in the U.K.?

      Finally, let's be honest on why some central government departments are using AWS and it has nothing to do with pricing or data being classified at Official or Official Sensitive. Most CxOs are in for a 2 year stint and have been padding their resumes with AWS "transformation" projects, because they are on to their next job soon.

  3. HmmmYes

    For me, its less what/whos the cloud is, more that the clouds provides an emulation of a stock x64 hardware.

    I dont care about having to learn and throwaway cloud provider tools for admin-ing the VMs.

    I *do* care that I get a good emulation of whatever Plex86 spoof, and are able to remotely admin it.

    1. HieronymusBloggs
      Joke

      "its less what/whos the cloud is, more that the clouds provides an emulation of a stock x64 hardware"

      Maybe it's time to move from writing your apps in assembly to using a compiled language.

      1. HmmmYes

        Nope.

        I do web stuff in Python.

        All that a clubd.VM/hyper visor is, is a spoof of Plex - x64,whatever enet, spoof controller.

        I emulate the same spoof hw on my devlopment machines I know tat the OS will have been installed in the same way.

        Then the hosting hardware can move from x64, toe PowerPc to whatever. I dont care. Im not tied to a physical hardware platform.

        1. Anonymous Coward
          Anonymous Coward

          Surely with Python and AWS/Azure/Cloud you're using containers no? In which case you don't give too much of a f*ck about the underlying hardware. Perhaps Intel vs AMD for MKL calcs.

          1. LewisCowles1986

            There is no equivalence amongst hardware, just compatibility. If you were running math on taxes I'd hope you'd care about the difference between a modern intel and AMD pre this year. If you are unlucky enough to run ARM in the cloud then I'm not sure it would be of much use to enterprise businesses (lots of hype, I've never heard anything but horror stories from people working at businesses that try). POWER is supposed to be amazing. Met some people that had set new benchmark records they claimed were not synthetic with off-the-shelf software last year (MariaDB & Quru Labs).

  4. Warm Braw Silver badge

    Corporation tax is based on profits, not revenues

    They clearly feel they can make a virtue of that since Macron has been slapped down by Washington.

    1. LDS Silver badge

      Re: Corporation tax is based on profits, not revenues

      As any company which creates fake expenses to hide profits will explain you....

    2. John Brown (no body) Silver badge

      Re: Corporation tax is based on profits, not revenues

      "They clearly feel they can make a virtue of that since Macron has been slapped down by Washington."

      I just read that article and it sounds to me like bog standard political negotiations. Announce something draconian that nobody really wants, wait for the outrage, then scale it back a notch or two to what you really wanted in the first place to sounds of relief by the those affected. Job done.

      If they'd started from the position they'd wanted in the first place, the same cries of outrage would have been heard and then they'd have to scale back to something less than they wanted. It's interesting how the article describes it as a climb down when in fact it's just business as usual. You'd think the media political and economy editors would understand that by now. Perhaps they do, but just delight in knocking down anyone who isn't part of their agenda.

  5. Steve Davies 3 Silver badge
    Unhappy

    and when?

    Parliament tells HMRC to collect all that lovely tax from Amazon...????

    I wonder if their AWS based systems will suddenly return 404 errors?

    Amazon have HMRC and by implication HMG and therefore US by the short and curlies (MS isn't that much better)

  6. Anonymous Coward
    Anonymous Coward

    Investment?

    our profits have remained low given retail is a highly competitive, low-margin business and our continued heavy investment

    I am not an accountant, but surely capital expenditure ("investment") is not something which can be offset against profits?

    1. Matt Ryan

      Re: Investment?

      You jest? https://www.gov.uk/capital-allowances

    2. Naselus

      Re: Investment?

      Any government which didn't allow you to deduct capital expenditures from profits before tax would basically be removing the primary incentive for businesses to update plant, and adding a pretty strong incentive not to upgrade anything until it literally falls to pieces, since you'd need to pay out x% of the price of hardware on tax with money you no longer own (because you've already spent it on the hardware).

  7. Anonymous Coward
    Anonymous Coward

    It's a little concerning that the burden of paying tax is put on the companies by the media when in reality it is the governments that need to change the law so the companies can't avoid tax.

    Sure there is the ethical argument that they should pay tax but to believe any company set up to make as much profit as it can is going to pay something they don't have to just because they should is as likely as finding unicorn shit in a leprechauns garden.

    1. Roj Blake

      Re: in reality it is the governments that need to change the law

      But if governments changed the law, they'd miss out on those juicy campaign donations from the multinationals, and ministers might not be able to end their careers as NEDs!

      1. iron Silver badge

        Re: in reality it is the governments that need to change the law

        I've a feeling Neds means something different where you are than where I am since I doubt most ministers could swallie the Buckfast required.

        1. Roj Blake

          Re: in reality it is the governments that need to change the law

          Non-Executive Director :)

  8. Tromos
    Flame

    £9 million funding

    I don't care about the vulture capitalist, but I'm incensed (see icon) to hear that local authority money is going into things like this. What right have they to gamble with ratepayer's cash while reducing refuse collections, closing libraries and generally not providing the services they're meant to?

    1. Blitheringeejit
      Holmes

      Re: £9 million funding

      Local authorities are actually trying to minimise the reduction of refuse collections, not to mention more life-critical things like childrens' services and social care, when their own budgets have been slashed to ribbons by central gummint. If they have any opportunity to reduce the cost of IT services, they really have to take it. You can be as incensed as you like, but it's central gummint cuts which are driving this agenda, not local authority preferences. So it's central gummint you need to be incensed by.

      1. Roland6 Silver badge

        Re: £9 million funding

        >So it's central gummint you need to be incensed by.

        Agree, however, local authorities are going about things in a stupid fashion.

        For example, in my county the decision has been taken to close 8 libraries. We went through the documentation and there are some corkers:

        All libraries are open on Sunday, however, it has the lowest footfall (we are talking dramatically lower). The idea that you could close the libraries on a Sunday seems to have not occurred to TPTB: the savings arising are sufficient to fund 2 libraries. I could go on, but there was a really interesting Finance meeting recently, where my 14 yo daughter stood and spoke pointing out the obvious savings that could be made and thus keep all libraries open!

    2. John Brown (no body) Silver badge

      Re: £9 million funding

      "I'm incensed (see icon) to hear that local authority money is going into things like this."

      Most councils have money in the bank. Interest rates are very low. They are allowed to invest that money but have very strict and weird restrictions on what they can do with it. For example, they can't invest in housing but can invest in commercial properties. In this case, they were probably investing in a something they could use. They should probably have looked more closely at the dependence on a single large customer and used their shareholder influence to encourage a wider customer base. You expect a turn-over of customers as contracts are up for renewal and no matter how good you are, a portion will shop around. That's ok with lots of small customers. But take on one or more big customers, and when it's their turn to shop around and use their spending power to drive costs down, sometimes you have to walk away and hope you can survive the time it takes to replace that workload or make people redundant.

  9. Hans 1 Silver badge

    While there may be compelling reasons for that decision

    If you think about it for a second, I cannot see a compelling reason, mainly because of lock-in. You would want to ideally use multiple cloud vendors for increased resilience, better uptime and avoid lock-in.

    OpenStack is the only framework that ticks all these boxes, procure from several players, if a datacenter of one of them goes offline have another DR setup at a different player. Should a player choose to change the terms of the contract, you can always quite easily move to another ... same framework.

    only procure public cloud services from Amazon, Google, or Microsoft.

    Ahhh, OK, but is this legal ? I doubt it.

    As for the UK player, tough world we live in ... feel sorry for the boyz and gals who worked there :-( ... how they could not leverage HMRC as a customer to get more is sad.

  10. joewilliamsebs

    85% of revenue from a single client?

    If, as an IT contractor, I derived 85% of my income from a single client, HMRC would have a strong case to make that I am in fact an employee of that client and should be taxed as such.

    1. Sir Runcible Spoon Silver badge

      Re: 85% of revenue from a single client?

      It's more about the relationship than the fact you get most of your income from a single client.

      It would be difficult for me to engage with multiple contracts at the same time for a couple of reasons..

      1. The clients generally prefer to engage with a company that can offer up a resource that can deliver 5 days worth of effort each week. it's just how they organise their project finances.

      2. The complexity of the projects undertaken would mean it would be easy to get muddled if I were to work on several contracts simultaneously, it's hard enough working on several projects within the scope of a single client.

      The point is, I don't *act* like an employee, and I don't allow clients to treat me like one either. HMRC tend to ignore the contracts (since they were all re-worded to be ir35 compliant) and look to how the contractor and the client interact.

      No-one tells me how to go about my business. They give me the project, I manage myself and how I deliver that project. The client assesses if I am meeting my obligations, and if I'm not they terminate the contract and get someone else in.

      For example, if I want time off, I am considerate of the clients' needs but they don't get to say yes or no - I simply inform them when I intend to be unavailable for project work. I do ask them if the timing would cause them any great inconvenience and I might consider re-timing if a powerful enough reason was presented, but it's entirely down to me.

    2. My Alter Ego

      Re: 85% of revenue from a single client?

      When you make the rules you don't have to follow them...

    3. Roland6 Silver badge

      Re: 85% of revenue from a single client?

      The trouble is as an IT start-up that is generally the case. You get one customer, bend over backwards to keep them happy in the hope you can use them as a reference to get the next customer.

      It is clear that is the case here with DataCentred. The government has been going on about its pledge to award more business to SME's, however, satisfying the entry criteria is neither simple or quick, also G-Cloud is a relatively new and under utilised initiative. So DataCentred would have put significant investment into gaining the HMRC contract and use it to build up both it's infrastructure and track record in government.

      It would not surprise me that some in HMRC used DataCentred as a learning exercise and so make appropriate demands on Amazon and AWS and thus it was never HMRC's intent to use DataCentred long-term.

  11. Sir Runcible Spoon Silver badge
    Paris Hilton

    Let me get this straight

    Whilst AWS might be cheaper at the till, paying all that money to a firm that doesn't pay a lot of taxes in the UK could actually be more expensive than buying a slightly more expensive solution from a local provider who *does* pay taxes to HMRC.

    Can we go and double-check recent expense claims of Amazon execs?

  12. Anonymous Coward
    Anonymous Coward

    And frankly, should they?

    Frankly yes. Leaving aside the issue of whether or not you can have a fair and open competition if you state a policy that prefers certain suppliers over others, you only need to look at the government's Industrial Strategy green paper to understand the importance government is placing on using procurement to help economic growth and keep the UK at the forefront of the global digital economy. Describing a UK SME as a "minnow" and implying that it in some way deserves to go under is reprehensible, as is glossing over the sensitivities of HMRC doing business with a company that is constantly in the headlines for its tax practices.

    1. rmason

      Re: And frankly, should they?

      They were a tech company turning over a microscopic amount compared to their competitors, and now they've gone bust.

      I don't think the word "minnow" is inappropriate. Winning that single contract made them, losing it destroyed them,

      If it quacks like an, erm, minnow...

  13. rcaller

    Unstable Cloud

    I am pretty sure that the reason that HMRC wanted to move from Datacentred and UKCloud is that the service provided was constantly breaking and had next to no inbuilt cloud tooling. The HMRC's 'tax platform' is a valiant attempt to build a good system but was crippled by poor reliability from the cloud providers.

    1. Anonymous Coward
      Anonymous Coward

      Re: Unstable Cloud

      You're saying a one-man-and-his-dog company with a £1m turnover can't provide 24/7 service and modern tooling to one of the largest IT estates in europe?

      Shocking, shocking I tell you.

      I'm actually surprised a company that small was procured from in the first place; one of the criteria assessed during procurement is the stability and longevity of the supplier. I can only imagine that one was waived because they were delivering openstack-based compute services, so could be trivially replaced if necessary.

      1. Anonymous Coward
        Anonymous Coward

        Re: Unstable Cloud

        What kind of name is DataCentred anyway? Looks like a typo to me. I bet some eyebrows were raised at HMRC meetings

  14. Robert Carnegie Silver badge
    Joke

    Curiously,

    HMRC now seems never to have heard of my "Glamazonian Women" model agency, which is pretty convenient :-)

  15. m0rt

    HMRC referring to taxpayers as 'Customers'

    Even internally HMRC staff cringe at this use of the term. Customers dictates that the person has a decision to use them or not.

    We are *not* customers, HMRC. The fact you use that term means you are not fully aware of the 'business' you are in and is rather worrying, given your obligations.

    1. John G Imrie
      Facepalm

      Re: HMRC referring to taxpayers as 'Customers'

      I thought that customers meant the other Government Departments.

      1. m0rt

        Re: HMRC referring to taxpayers as 'Customers'

        "I thought that customers meant the other Government Departments."

        HMRC refer to taxpayers as customers.

        http://www.express.co.uk/news/uk/693767/hmrc-calls-taxpayers-customers

        https://www.accountingweb.co.uk/tax/hmrc-policy/stop-calling-us-customers-taxation-campaign

        ..and from their own spiele:

        "are a high volume business; almost every UK individual and business is a direct customer of HMRC"

        https://www.gov.uk/government/organisations/hm-revenue-customs/about

    2. hughgrection

      Re: HMRC referring to taxpayers as 'Customers'

      Oracle does the same with their hostages ;)

  16. Anonymous Coward
    Thumb Up

    HMRC, I salute you!

    In the world of business and technology, HMRC have always been known as a smart, savvy player whose watchword is ruthless fairness and efficiency. They are like the Chancellor's rapier, cutting through corruption and dishonesty to make the UK - yes even Wales - the international bastion of all that's good and right in the world. And the Chancellor is like a financial god in the form of man. We are blessed as a nation to have this calibre of people fighting the good fight on our behalf.

    So if HMRC's actions have unfortunately allowed a UK business to go bust, then I must salute them, and salute them again. For when your head is in the clouds, looking to heaven, you simply can't be held responsible for the occasional crushed insect under foot.

    1. #define INFINITY -1

      Re: HMRC, I salute you!

      Two commentards have (thus far) failed your IQ test, methinks!

  17. adam payne Silver badge

    HMRC using Amazon, how ironic.

  18. John Smith 19 Gold badge
    Unhappy

    " whether Whitehall is swapping one set of large IT suppliers "

    that would be "yes" and "yes."

    Meet the new oligopoly

    Same as the old oligopoly.

    You have been fooled.

    Again.

  19. FuzzyWuzzys

    Don't want to sound nasty but...

    ...if you're entire business is built on supplying just one customer then you're asking for trouble.

  20. Hans 1 Silver badge
    Big Brother

    All this cloud stuff is basically down to this:

    The US already had data on 3bn people on the planet, thank you ever so much, facebook, and was lacking data on businesses ... then, some smart ass came along and the following discussion took place:

    Boffin: "Since we cannot hack each and every company network, why not centralize the data in controlled data centers. Let's use the might of US IT enterprises and call it 'The Cloud'"

    Manager: "Yeah, but, nobody is stupid enough to put their data on your 'Cloud'"

    Boffin: "Well, Microsoft has a 90% marketshare in client software, IT decision makers are as thick as rock!"

    Manager: "Right, let's do that, then."

  21. jbstarbug

    Are those figures correct?

    Computer Weekly said it had an investment of only 1m in 2016 and previous to that its turnover was under 200K:

    "In October 2016, DataCentred received a £1m investment from Barclays, the Greater Manchester Authority and others. Its annual revenue increased significantly from £171,000 in 2015 to nearly £1.2m in 2016, but it recorded losses of almost £1.8m in the last financial year."

    Where did the 9m come from?

    The company has only been trading for 4 years according to CW.

  22. strum

    Note to El Reg

    It's lazy journalism to lump Amazon in with all the big, corporate tax-fiends (whom I'd happily burn at the stake).

    From the beginning, Amazon did what companies are supposed to do with profits - they re-invested (hence, no taxable profits). Even now, they're still returning minimal real profit - and paying tax on that.

    I see no evidence that they're involved in any multi-national tax evasion carousel - just a successful company, doing what it's supposed to do.

    1. colinb

      Re: Note to El Reg

      Huh?

      They are pulling the collect royalties and pay the US for 'IP' scam via a non taxable Luxembourg based partnership. Just because its legal doesn't mean its not a scam.

      Strangely the royalties are just above that amount that means virtually no tax and just below the amount that means they are out of business. Last tax paid was 15M on 15Billion of revenues.

      The EU have asked for 250M back tax because of the 'finger in the air' royalty calculation.

  23. LTECH

    The AWS con!

    "If you say it enough and enough people say it, they might just believe it"

    AWS is cheaper on entry, but when you scale, there are huge costs. Costs for bandwidth, CPU, disk space, loadbalancers, support and more! All things included with a great many other UK Cloud providers as part of the service.

    HMRC will without doubt pay more in the long run. They now have integration costs too racking up at £1000's a day. The tax payer pays dearly for this sort of short-termism.

    AWS does not pay tax or contribute to the British society in the same way us British citizens do. Avoiding tax by using loop holes in Ireland and Luxembourg needs to become a thing of the past.

    Washing profits offshore with management charges from businesses in tax havens is not ethical and needs to stop.

    If a UK SME did this, they'd be imprisoned for tax evasion.

    If you believe this is the right move for the Government you are as daft as the CIO of HMRC.

    1. Adam 52 Silver badge

      Re: The AWS con!

      "AWS is cheaper on entry, but when you scale, there are huge costs. Costs for bandwidth, CPU, disk space, loadbalancers, support and more! All things included with a great many other UK Cloud providers as part of the service."

      Really? Who provides unlimited CPU, disc and support?

  24. Anonymous Coward
    Anonymous Coward

    I's very clear to me ..

    .. that we best stop paying taxes. I rather bring it myself to the schools and roadworks and other institutions, that way I know at least it's not use to fund someone's next jolly to China to talk about pork.

  25. HmmmYes

    Well Amazon dont pay (corporate) tax as they dont make a profit.

    Amazon service's are brought to you by the munificence of their share holders.

  26. Anonymous Coward
    Anonymous Coward

    What goes around, comes around...

    Whilst I’m sure the HMRC contract being dropped was a large factor, I can’t say that I’m surprised to see DataCentred fold, as quite frankly the way things were operated was a disaster.

    I run a small business, and we were looking to take a rack or two in their facility 18 months ago. We contacted them, spoke with the sales-person, who up front was very agreeable, and proposed a solution that appeared to meet our needs. To say that the offer was rather competitive is true, but not so much so for a company just starting out that it should have rang alarm bells.

    Cue a trip for me and two other staff to Manchester to visit the facility and meet the sales-person face-to-face, during which we were suitably impressed that we agreed to go forward and started negotiating an official proposal.

    This is where things went bad; the sales-person taking weeks to reply to e-mails and phone calls, and no final proposal for a substantial amount of time with a new excuse on each occasion – including an alleged hard drive failure on their laptop.

    The proposal we finally received was missing many of the components that had been previously negotiated, and when an amendment was requested, delays of days and weeks then commenced again. This is in addition to the fact that the proposal documents we had received were clearly re-cycled, and made reference to other customers, including several local authorities.

    Next thing we know, said sales-person has apparently left the company "under a cloud", at which point Dr Kelly takes over the process of trying to win our business. It then became apparent that much of what the sales person had negotiated with us and apparently had approved, in-fact wasn’t, and Dr. Kelly seemed quite indifferent to the fact that someone operating on behalf of his company had treat us with contempt and dishonesty.

    Needless to say, we didn’t go ahead with the move – they even then tried to bill us for trial access that had been provided free-of-charge to their cloud platform during negotiations!

    We were not a large customer for an organisation like this, but a customer is a customer. And when you have a datacentre of that size to fill, you need everyone in the door you can get. If others were subject to the same treatment we were, it’s very little wonder this company is no longer trading.

  27. Anonymous Coward
    Anonymous Coward

    Yeah... my web hosting company tried to deal with them. After a sales rep gave us a quote, we were ready to sign up, and he mysteriously disappeared.

    We were then told the quote was invalid, and all the perks we'd been promised disappeared, and the price rose exponentially.

    3 of us wasted time and money to go see this business. Shame that it became very clear that they just weren't interested in our money. Honesty and sticking to promises matter, kids!

  28. Anonymous Coward
    Facepalm

    Things that make you go Hmmm...

    Many will have suspected monster dodginess about Govt. data centre contracts such as when Ark came from nowhere to get .gov hosting and The Right Honourable Baroness Manningham-Buller, DCB magically appeared as non-exec for Ark.

    https://www.theregister.co.uk/2015/03/12/ark_bags_700m_gov_data_centre_deal_sources/

  29. Anonymous Coward
    Anonymous Coward

    Closed Procurement???

    "The Register has also seen evidence the Department for Work and Pensions has a policy to only procure public cloud services from Amazon, Google, or Microsoft."

    Is that even legal???

  30. Anonymous Coward
    Anonymous Coward

    "Hyperscale cloud technology is newly available in the UK"

    Can anyone confirm that HMRC are actually running out of the UK?

    As far as I know this AWS and Azure where only recently available in the UK. If these projects have been going on for more than one year, surely they started running their applications in Ireland or god forbid the U.S.

  31. HoggertyHog

    "pulled the plug on a services contract" Not knowing anything about DataCentered. But is there a risk that they got drawn down the road of oh phat contract how can we monetize? The NHS is riddled with this crap where, for example, a 3rd party infrastructure provider wants 6kquid to provision a single VM. I am if-treeig but maybe a predictable up-front cost is easier for HMRC to consume? Oh and look they can flog the data and get AI services!!

  32. ManMountain1

    It's not a 'lower cost to the taxpayer' if a tax paying business goes under, along with the tax revenues from its' workforce, in favour of a tax avoiding monster like Amazon! The Government should not spend a penny with any organisation who isn't paying appropriate levels of taxation in the UK!

  33. post-truth

    Do I hear an echo? In the courses I teach, my primary examples of super-vulnerable government departments, even under the old data protection law, are HMRC and the DoH. Especially as they reportedly are insane enough to see the GDPR primarily as an opportunity to screw over their subcontractors...

    Oh well. More course material, more evidence for class actions, and more motivation for intervention, Orders, and fines by any of the 45 foreign supervisory authorities that lawfully can ignore the Commission and Member State governments alike. Not all of them adore HMG or HMRC. And even the ICO is being granted financial independence and (limited) Henry VIII powers to make law immune to government veto. Roll on the GDPR!

  34. Anonymous Coward
    Anonymous Coward

    USA PATRIOT ACT / USA FREEDOM ACT

    This move will surely open UK government operational data, taxpayer and citizen data up to undisclosed access to the US government.

  35. hoola Bronze badge

    No different from the Supermarkets

    This is just the same as the supermarkets. Use a small supplier who then invests to support the new business only to have it ripped from under then with minimal notice.

    Hundreds of smaller manufacturers and business have folded for this very reason. What is really hypocritical is that in the supermarket arena, the Government has a Select Committee specifically looking at this sort of practice. The fact that they are using an outfit that deliberately does everything possible to avoid paying tax is just typical. The whole G-Cloud and everything else around public sector procurement was supposed to encourage smaller players. This is then what you get for using the very system that the Government is trying to support.

  36. JLV

    economic math doesn't make sense

    Hmmm, cloud advantages are all about being able to spin up stuff as needed.

    As people have pointed out, a tax revenue agency is going to spike near its filing deadlines.

    The key bit though is that for the whole thing to make long term economic sense from the POV of the cloud provider, the servers need to be used most of the time, by various customers.

    How does that sit with a cloud provider that is 85% reliant on one customer for its business? Do they sub-contract the HW use elsewhere? If so, what do they bring to the table, besides costs and more moving parts to go wrong? I mean over-reliance on one customer has always been a business risk red flag, but it should be doubly so for cloud providers.

    'sides, cloud is hard - the big guys mostly manage to keep their occasional outages down, but they've all had teething problems getting there.

    Seems (speaking naively about clouds) that the govt would best avoid lock-in by pursuing a cloud strategy that ensured it could shift its workload between the big cloud providers - Azure, AWS, <fill in the blank>. There are probably operational resilience reasons to do that as well. Start with one cloud, get your feet wet, then branch out to others. You wouldn't want to miss your tax take because AWS choked inconveniently at the filing deadline, right?

    Not overly impressed with the article.

    p.s. Tax avoidance is an entirely different can of worms, only tangentially related to the main subject of the article and seems drafted in to broaden the base for criticism of vendor switching.

    I'd be 200% behind any concerted, well-thought-out efforts for industrialized countries to avoid the current cherry-picking the multinationals are engaged in. How about: take revenue in country X (UK in this case), multiply by net margin as filed in country Y - their main stock market listing domicile - (USA in this case) - financial statement fraud is usually a big case, then apply a floor minimum of 50% of country X's corporate tax rate * country X revenue, paid in country X. Multinationals not complying would simply have their business licenses revoked in country X and Western countries would agree not to pursue WTO cases where this was the trigger.

  37. IGnatius T Foobar Bronze badge
    Facepalm

    Amazon is the new Microsoft

    Amazon is the new Microsoft. Amazon is an existential threat to every technology company that is not Amazon. Be afraid.

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