Academy, owned by the Capita Group, developed the software because up to 25 of its council customers still run crucial revenues and benefits data on old VME mainframe systems. It wants the councils - grouped together as the Academy user group - to pay£3,000 per software product over and above their standard maintenance contracts.
But members of the user group claim 2000 compliance was implicit in their contracts and most have so far refused to pay up.
Chris Cooper, head of revenues at East Hertfordshire DC and chair of the Academy council tax user group, said: 'There is a dispute between us and Academy and discussions are under way.'
Academy operations director Peter Godfrey insisted his firm was being both reasonable and responsible: 'We have looked at the cost of us developing a year 2000 compliance code and decided that it would be fair to make a small charge.'
He said eight councils have so far ordered the software and Academy was willing to let councils pay next April.
But Mr Godfrey added: 'What we've said is that it does in effect give me the opportunity to terminate the contracts. If they do not pay they will be in breach of contract . . . The whole of the UK economy is based on paying for what you're getting.'
He said he only expected to recover between£150,000 and£175,000 of the£300,000 it cost to develop the software.
Mr Godfrey claimed some of Academy's competitors had been charging councils 'enormous amounts' for similar work.