The UK National Audit Office (UKNAO) has warned that HM Revenue & Customs may not have the full functionality and scope of its new Customs Declaration Service (CDS) in place by March 2019 when the UK plans to leave the European Union.

This is according to the UKNAO progress report on the CDS programme which has both identified and highlighted risks and issues ahead of its implementation.

The NAO acknowledges that HMRC has made progress in developing the new customs system – part of an earlier existing programme – but it is now estimated that it may need to be fast-tracked for earlier implementation than was originally planned.

This major challenge for the UK involves the plan to replace this system (known as CHIEF) which was initiated back in 2013-14. It currently collects around £34bn ($44.97bn) in tax and duty on imports from countries outside the EU each year.

There is still much reorganisation for HMRC at the Port of Dover before the March 2019 Brexit exit deadline when intra-EU excise checks on incoming passengers and business vehicles will escalate substantially. At the last count in 2015-16, it processed around 55m import and export customs declarations. At the same time, nearly £700bn ($926bn) worth of goods crossed UK borders in 2015.

SMOOTH OPERATIONS VITAL

Not surprisingly both HMRC and the NAO are pretty concerned that the smooth operation of this collection system should continue, since it is critical to the UK economy.

However, the actual procedures obviously remain vital in carrying out routine checks on what is dutiable and what is duty free – both at business and ordinary passenger traveller levels.

The NAO also adds that the existing programme is also ‘operating with some uncertainty due to the unknown outcome of the UK/EU negotiations’.

It adds that no changes have yet been made to the scope of the CDS programme following the UK’s decision to leave the EU.

DECISION TIME FOR THE UK GOVERNMENT

Amyas Morse, Head of the National Audit Office says the ball is firmly in the government’s court.

Commenting on the challenge to both fund and settle in the new system in an orderly fashion, Amyas Morse, Head of the National Audit Office relayed an important to government (13 July 2017) last month, where the point was made that it basically needs to make a decision on what it wants to do.

He said: “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.”

This warning also coincides with the big changes expected to the post-Brexit landscape, according to other comments made by Jon Thompson, the CEO and Permanent Secretary.

‘PROFOUND OPERATIONAL IMPLICATIONS’

He said: “The UK’s exit from the European Union will have profound policy and operational implications across tax, benefits and customs regimes, and since the referendum we have been working closely with colleagues across Whitehall, including the Department for Exiting the European Union and Department for International Trade, to understand the implications for HMRC and ensure we are ready to deliver on day one.

“There are likely to be changes to customs, VAT, excise, social security, direct taxes, data sharing and litigation.

“We will be working with HM Treasury to bring forward legislation to establish a new framework for the UK customs service and other areas as required, and will continue to engage with stakeholders to ensure that HMRC is able to help them understand and prepare for any changes in the way the tax, benefits and customs systems are administered.”