MPs call on the Treasury to devote enough cash to ensure that both the outgoing system and its replacement can handle post-Brexit requirements

After the UK leaves the EU, the country will need to process almost five times as many customs declarations each year  Credit: PA

If the Treasury fails to commit more funding to help HM Revenue and Customs implement a new customs system, the consequences will be “catastrophic”, the Public Accounts Committee has warned.

A new PAC report recommends that, by next month, the Treasury should make sure that the Customs Declaration Service (CDS) currently being developed by HMRC receives extra funding to increase its capacity. Under HMRC’s original plans, the system was designed to handle 150 million customs declarations a year – comfortably in excess of the current UK annual average of 55 million.

But, with Brexit, set to create an extra 200 million declarations each year, HMRC needs to increase the capabilities of CDS to the point where it can cope with at least 255 million declarations every 12 months. 
HMRC should also work on building out its existing system – known as CHIEF – to the point where it can also, theoretically, cope with the UK’s post-Brexit customs needs, PAC said.

“We are surprised to hear that HMRC and HM Treasury are still only ‘in conversation’ over the £7.3m needed to upgrade CHIEF to be able to deal with the potential 255 million declarations that could be made each year,” the committee said. “In the context of the CDS programme, this would seem a relatively small sum to pay to guard against the wider financial and reputational costs of failure.”

PAC added: “It needs to progress this work urgently and obtain the additional funding required, to ensure that CDS can deal with the potential increase in volumes, and that an adequate fall-back option is in place in case this is delayed.”

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In addition to the recommendations to upgrade CHIEF, and to provide additional funding to improve both platforms, PAC made two further recommendations.

Firstly, to ensure that HMRC informs affected traders of the progress of the CDS project by January, while also working to promote the option of becoming a “trusted trader” – of which there are only 604 in the UK, compared with 6,000 in Germany.

Secondly, that HMRC reports back to the committee by March with details of how it is managing the CDS project in the context of a much wider transformation agenda, including the Making Tax Digital programme and other vast and complex changes.

PAC chair Meg Hillier said: “Failure to have a viable customs system in place before the UK’s planned exit from the EU would wreak havoc for UK business, trade and our international reputation. Confidence would collapse amid the potentially catastrophic effects. HMRC is under considerable pressure to deliver the new Customs Declaration Service in time, but it does not yet have funding to increase the capacity of CDS to deal with the consequences of Brexit—nor to develop contingency options. This is deeply worrying.” 

She added: “HMRC requires a relatively small sum to upgrade the current CHIEF system—a move which would provide some peace of mind to traders, many of whom are still operating with limited information and in great uncertainty. HMRC tells us it is merely ‘in conversation’ over CHIEF upgrade costs when, on behalf of business and the British public, it should be banging on the doors of the Treasury. HMRC must press the case to secure this funding now and ensure that, if other plans fail, customs will be fit for purpose.”

Earlier this year the National Audit Office called on the government to better support HMRC in delivering the CDS project as a matter of urgency.