Meg Hillier writes to Jon Thompson expressing doubts about whether tax agency will be ready for no-deal Brexit
MPs on the Public Accounts Committee are “disappointed” about delays to HM Revenue and Customs’ updated customs system, and are not convinced the agency is ready for a no-deal Brexit, its chair has said.
Committee chair Meg Hillier (pictured above) wrote to HMRC permanent secretary Jon Thompson this week expressing her concern that the Customs Declaration System would be delivered two months behind schedule.
“We were disappointed that despite your previous and repeated assurances about the progress of CDS, there has yet again been a slip in the timing of the programme just weeks after we last took evidence on the subject,” Hillier said.
In a letter to the PAC in April, Thompson told MPs the agency was “on track” to complete the update on time.
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But giving evidence to the committee on 5 September, Thompson said that, “being realistic about it”, CDS would not be fully rolled out until March, two months after it was due to come into operation.
The revelation has vindicated the PAC’s repeated warnings that the CDS would not be ready to process exports by the new year. The tax agency has put contingency arrangements in place and is in the process of testing them, which Hillier said was “good news”.
Work to replace the existing system, Customs Handling of Import and Export Freight (CHIEF), began in 2013-14. After the EU referendum, it became clear that post-Brexit, its replacement would need to handle almost five times the volume of declarations it deals with now – an estimated 255 million each year, compared with the current tally of about 55 million.
The first stage of the rollout went ahead in August as planned, and the second was due to be completed on schedule in November, Thompson said. However, he said the third and final phase of the rollout, which had been slated for December, would be pushed back to March.
HMRC was testing its contingency plan, a dual system that would use CHIEF for some functions and CDS for others, which Thompson said would reduce the pressure on the new system.
In her letter, Hillier also said she was “concerned and disappointed” about the HMRC’s lack of progress in terms of helping businesses prepare for the possibility that the UK might leave the EU without reaching a withdrawal agreement.
The PAC had urged the tax agency to tell businesses how to prepare for a no-deal scenario in July, but two months later Hiller said, “You gave us no assurance that HMRC has a plan to ensure that businesses are aware of what they need to do.”
And she expressed concern that HMRC would not have arrangements in place in time for Brexit to ensure UK businesses do not have to pay VAT on goods they import from the EU earlier than they do now. Thompson told the committee in September that HMRC was working with software developers to put those measures in place by March 2019.
“We understood from your evidence in September that, subject to getting a solution in place on import VAT, you consider HMRC’s strategy will provide a customs system that can cope in April 2019 if there is no deal,” Hillier wrote.
“You do not therefore currently see any significant risk to tax revenues or tax compliance. We do not share your optimism and expect you to inform the committee immediately if this changes,” she said.
HMRC has been contacted for comment.