The proposed sale of UK NHS software supplier iSoft to Australian firm IBA has hit the buffers after lead NHS contractor CSC blocked the move.

Troubled iSoft, which is contracted to supply its Lorenzo care records system as a core part of the NHS's £12.4bn National Programme for IT (NPfIT), was put up for sale after revealing pre-tax losses of £14.3m in the six months to 31 October. Delayed full-year results issued in August last year showed a £382m loss.

In March, the company sacked commercial director Steve Graham after an investigation into accounting irregularities at the firm. The software supplier is also under investigation by the Financial Services Authority after irregularities were found in its 2004 and 2005 accounts.

Earlier this month, iSoft announced that it had agreed terms of a sale for around £140m to IBA. But analysts warned that the deal would need to be agreed by CSC, the lead contractor in three out of five NPfIT regions.

But CSC has written to iSoft, saying it would not agree to a change of control. It is understood that iSoft and IBA are both seeking clarification of CSC's reasons for blocking the deal.

CSC is likely to require assurances over the future development of Lorenzo. The IT services giant retains a right to step in and manage the Lorenzo's development should it prove necessary, as well as a right to approve any future sale of iSoft.