HMRC has formalised the premature termination of its £10bn mega “Aspire” contract with Capgemini and Fujitsu.

The deal was due to end in 2017 but HMRC chose to terminate the deal early, claiming it could make as much as £200m a year from 2020-21 onwards by scrapping the contract and entering a series of smaller, more flexible deals with new and existing suppliers.

Additionally, HMRC chief executive Lin Homer believes that the end of the megadeal with Capgemini and Fujitsu will improve the HMRC’s ability to take advantage of new digital technologies, with the ultimate goal of improving services to the British taxpayer. Outsourcing end-users are increasingly favouring shorter contracts with smaller, niche service providers to quicken the uptake of new trends and technologies.

As Ms Homer explains, “HMRC’s ambition is to be one of the most digitally-advanced tax authorities in the world, and the agreement we have reached to exit the Aspire contract brings that a huge step closer”.

The bidding for new IT suppliers will begin next month and HMRC plans to prioritise work with SMEs when possible. Some of the new contracts are expected to take off before the end of next year.

Bain, the specialist consultancy firm, is helping HRMC with its exit strategy in order to provide a smooth transition. The Aspire contract currently takes up 84 per cent of the HMRC IT budget. The deal had been under criticism for several failures attributed to the deal’s size and complexity, and particularly to the challenges of managing such a huge relationship.

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Related: HMRC will take on 250 Capgemini workers to ease Aspire contract transition

Monday 25 April, the National Outsourcing Association hosts its first Public Sector Conference offering civil servant insight into what the future of government outsourcing holds.