The government may allow contractor IBM's offshore staff to access to the Driver and Vehicle Licensing Agency's (DVLA) data on all the UK's drivers, it has been revealed.
Under the plans, staff in India will have access to information including registration plate numbers, addresses and credit card details, according to The Observer.
The DVLA insisted, however, that the data on millions of UK drivers would remain in the UK.
A spokesperson for the DVLA said: "All our information is stored in the UK and there are absolutely no plans to change this.
"A proposal by TfL (Transport for London) is being considered in relation to its Congestion Charge scheme, which will allow limited and strictly-controlled access to information from abroad, but this will not extend to any offshore storage of personal data or sensitive information.
The spokesperson added: "We are seeking appropriate assurances that it will not be possible for the data to be printed, copied or amended in any way when it is accessed from abroad."
IBM staff based outside the UK are expected to be able to access the data from the 18 May, the Observer said.
The newspaper reported seeing an internal email sent by IBM's commercial manager that read: "Since go live, TfL has directed what we retain within the UK certain support roles with access to data that they considered particularly sensitive.
"TfL has recently completed a risk assessment with the DVLA and the Department for Transport (DfT) and has concluded that they no longer require this additional level of control.
"As a result we have commenced a transition exercise to manage the changes to our support organisation over the next three months."
IBM, which took over from Capita on the Congestion Charge contract in 2009, said it did not comment on "client specifics".
The Public and Commercial Services (PCS) Union feared that the move could be an indicator of more DVLA services being sent abroad in future.
A consultation - due to end tomorrow, 20 March - is currently taking place on agency's plans to close its 39 registration and enforcement offices in the UK.
"We're doubtful it's a mere coincidence that this comes as the DVLA is planning to close these offices and we fear it could pave the way for further privatisation and offshoring of DVLA services," said PCS general secretary Mark Serwotka.
"As well as the threat to people's jobs and livelihoods, there are serious questions about the security of the personal information the company holds and has access to."
In 2009, the DVLA signed a contract extension with IBM for IT services, which means that the original 10-year deal will run for an additional three years from 2012 to September 2015.
The contract extension was signed just six months after a glitch in an IBM-run system led to 62,000 duplicate tax discs being sent out in the post.