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UK’s New Customs System ‘May Not Be Ready for Brexit’

UK’s New Customs System ‘May Not Be Ready for Brexit’

According to the National Audit Office (NAO), current information suggests that the new customs system intended to be introduced by the UK may not be ready in time for the country leaving the EU.

With the move planned for 2019, alongside a simultaneous exit from the EU Customs Union, rapid progress would be required, but according to the NAO this will not be possible without extra funding for the Customs Declaration Service (CDS).

Publishing a report on the CDS’ existing programme, the NAO highlighted a number of risks and issues that the UK’s revenue and customs body, HMRC, is struggling with ahead of the scheduled implementation of the new service in January 2019.

The NAO were keen to emphasise that HMRC’s programme began before the UK voted to leave in the Brexit referendum, and before the government had cited an intention to seek a new customs arrangement from March 2019 onwards.

HMRC’s plans, developed in 2013-14, were intended to replace its existing customs system, CHIEF, with CDS on the back of changes to EU legislation which would have been expensive and difficult to implement with the archaic technology they had at the time.

Highlighting the importance of CHIEF, which brings in around £34 billion per annum in tax and duty on imports, the NAO noted that the system processed around 55 million export and import customs declarations, and dealt with almost £700 billion worth of goods crossing UK borders.

The NAO were eager to stress the essential nature of the continued smooth operation of such crossings in their report, alongside the likelihood of the full functionality and scope of CDS not being available by March 2019, when the UK is slated to exit the EU. They made it clear that this was a risk recognised by HMRC.

They also raised the reality that HMRC’s CDS programme continues to operate with a deal of uncertainty surrounding it, due to the unclear outcome of the negotiations between the EU and the UK. As a result, they reported that no changes had been made to the scope of it in light of the country’s decision to exit Europe.

The report stated: “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.”

As the NAO’s Amyas Morse explains, although HMRC has made significant progress in the development of their new customs system, the reality is that it may need to be finished far earlier than expected should the country lack an agreement to extend timescales regarding the transition to alternative customs arrangements.

This leaves the UK government with something of a conundrum: is the extra cost and diversion of resources necessary to get a working system in place? Is this an insurance premium worth paying or not?