New UK customs system ‘may not be ready for Brexit’

7/16/2017

The UK’s planned new customs system is making good progress but may not ready by the time Britain leaves the EU if the UK also leaves the EU customs union in 2019, the National Audit Office (NAO) has warned.

Publishing its report yesterday on the progress of the Customs Declaration Service (CDS) programme, the NAO highlighted the risks and issues that the UK revenue and customs body HMRC is managing ahead of the planned implementation of the new service by January 2019.

The NAO stressed that HMRC had started its programme before the UK voted to leave the EU in June 2016, and before the government committed to seeking a new customs arrangement from March 2019. HMRC in 2013-14 started its plans to replace its customs system, known as CHIEF, with CDS following changes to EU legislation which would have been costly and difficult to make on its ageing technology. The CDS programme is one of 15 major programmes in HMRC’s wider transformation portfolio, the NAO noted.

Highlighting the importance of the system, the NAO pointed out that CHIEF collects around £34 billion in tax and duty on imports from countries outside the EU each year and in 2015-16, it processed around 55 million import and export customs declarations. And in 2015 nearly £700 billion of goods crossed the UK’s international border.

“The continued smooth operation of these crossing is critical to the UK economy,” the reports stressed.

It added: “HMRC has made progress in designing and developing the new Customs Declaration Service; however there is still a significant amount of work to complete, and there is a risk that HMRC will not have the full functionality and scope of CDS in place by March 2019 when the UK plans to leave the EU.

“HMRC recognises this risk. Particular risks to programme delivery include: the time contingency available to HMRC; the technical challenge of integrating the different elements of the CDS system; the potential increase in volumes following the UK’s decision to leave the EU; stakeholder engagement and transition planning; the programme management approach adopted; resource gaps; and potential for additional costs.”

The report said HMRC’s CDS programme was also currently “operating with some uncertainty due to the unknown outcome of the UK-EU negotiations, and no changes have yet been made to the scope of the CDS programme following the UK’s decision to leave the EU”.

It added: “Any changes to the new system requirements made shortly before the planned implementation date would increase the risk of additional cost or delay to the programme. While HMRC is working to manage the risks and issues, and is developing contingency plans, wider government must choose now whether it needs to do more to help HMRC to mitigate the risk of the system being needed, but not ready in time.”

Amyas Morse, head of the National Audit Office, commented: “HMRC has made progress in developing the new customs system, which was part of its existing programme, but it may need to be ready much earlier than originally planned if there is no agreement extending timescales on the transition to any new customs arrangements. Customs problems have obvious implications for the flow of goods in and out of the UK, so government as a whole needs to decide whether the extra cost and effort of getting a working system in place for day one is an insurance premium worth paying.”

The NAO said HMRC’s current estimate of the maximum number of customs declarations per year after March 2019 – based on current levels of UK-EU trade and subject to the new customs arrangement negotiated with the EU – was for around a 200 million increase on the 55 million existing declarations each year. HMRC estimates that around 180,000 traders will have to make customs declarations for the first time under the new system, assuming the UK leaves the EU customs union. This is in addition to the 141,000 traders who currently make customs declarations for trade outside the EU.