Her Majesty's Revenue and Customs (HMRC) is starting to show cracks as she faces a massive workload ahead of Britain's exit from the European Union in March next year, according to influential Public Accounts Select Committee members.
This is the last warning of the committee, which this time last year indicated that HMRC's preparations for its new Customs Clearance Service (CDS) are under considerable pressure and that failure would be "catastrophic".
The chairman of the committee, Meg Hillier MP, wrote to Jon Thompson, chief executive and permanent secretary of the HMRC, explaining that the committee was "disappointed" that despite previous and repeated assurances about the progress of CDS, the timing had once again slipped of the program.
CDS replaces the aging customs clearance of import and export freight systems (CHIEF).
In 2015, around 55 million customs declarations were submitted by 141,000 dealers. The UK's exit from the European Union (EU) could result in the number of customs declarations that the HMRC has to process each year increasing fivefold to 255 million. The Committee has stated that a failed customs system could therefore cause major disruptions to businesses, which could lead to delays in Dover and result in food on the border rotting in trucks.
HMRC's Thompson also recently said that it was exploring new models that would reduce the friction between traders interacting with the government, namely by looking for a business case to replicate the Singaporean model of single-window technology.
He told the EU Select Committee of the House of Lords that a "one-stop shop" for traders would integrate all 26 participating government organizations on the border. At present, some government agencies are demanding what Thompson called a "wet stamp … an actual stamp on a sheet of paper." He said that in Singapore "everything is done electronically and you can remove the wet stamp".
However, Thompson also warned that the solution was not a quick fix and expensive.
In the meantime, HMRC is working to increase CHIEF's ability to work alongside CDS as a dual system, and prepares the latter to become the primary system over time.
The most recent report of the Audit Committee is:
"HM Revenue & Customs (HMRC) has a daunting task as it prepares for Britain's exit from the European Union in whatever form, while realigning its ongoing projects and day-to-day services.
"The Committee acknowledges these challenges, but we remain concerned about the risks to customs and borders after Brexit and the impact on UK companies. The recently announced further delay of HMRC's new customs declaration service is unlikely to be ready for exporters until Brexit, and the need to further develop the HMRC systems so that they can carry through postponed accounting until March 2019 import sales tax in the event that there is no business, underline the risks. "
As mentioned above, the chairman of the committee, Meg Hillier, wrote to Thompson of the HMRC, in which he outlined the new concerns of MEPs regarding further delays in CDS.
Hillier said the committee asked the HMRC in July to get in touch with companies that might have to hand in customs declarations in the event of a no-deal brexit – but little progress has been made in the past two months. She said the HMRC had "no assurance" that "there is a plan to make sure companies know what they need to do".
However, the main concern remains the timely development of CDS for the increasing pressure of Brexit. Hillier said:
"We are disappointed that, despite your previous and repeated assurances about the progress of CDS, the program had a new schedule just a few weeks after we had the last evidence on this issue.
"My letter to you in July voiced my committee's concerns that a fully functional CDS would not be delivered by January 2019. At our demonstration, they told us that CDS will not be ready to export until January 2019, and consequently the period of dual-running with CHIEF is longer than expected.
"In our November 2017 report on BRexit and the future of customs, we found that HMRC must have a viable emergency option for CDS. So it's good news that you're testing your contingency plans now. "
Image Credit – Image obtained through HMRC
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