HM Revenue and Customs' use of IT is improving, but the department is still missing key technology milestones.

That is the verdict of the National Audit Office, which said the department was introducing useful IT systems to tackle tax evasion - under the Compliance and Enforcement Programme. While a number of factors contributed to HMRC achieving £4.32 billion more tax revenues in the five years to 2011, the budget cuts were hurting IT development, it said.

HMRC "has introduced new capabilities, notably the use of IT to identify incidences of evasion more effectively, although it is not yet exploiting the full potential of the new systems", said the National Audit Office. "It also had to defer and reduce the scope of projects to keep within annual budgetary limits, leading to reductions in benefits."

The department has spent £239 million over five years on five new IT systems, representing 62 per cent of overall expenditure, to tackle tax evasion.

Those systems have improved risk targeting and identified non-compliance, the National Audit Office said.

But it added: "HMRC deferred or changed the scope of projects in order to keep within annual funding limits. HMRC prioritised funding to deliver the Programme's key projects, including new ICT systems to improve risk targeting. Its emphasis on tight budgetary control led it to reduce the scope of some projects or defer delivery.

"The five largest projects delivering ICT systems, accounting for 62 per cent of Programme spending, all missed planned delivery milestones."

The National Audit Office called for HMRC to improve how it redesigns business processes around new systems, how it communicates the rationale for projects, and how it measures system performance.