Under current plans, the UK is set to leave the European single market and the customs union in March 2019. It would be catastrophic if HM Revenue & Customs' new customs system, the Customs Declaration Service, is not ready in time and if there is no viable fall-back option.
In 2015, around 55 million customs declarations were made by 141,000 traders. The UK's exit from the EU could see the number of customs declarations which HMRC must process each year increase five-fold to 255 million. A failed customs system could therefore lead to huge disruption for businesses, with delays potentially causing massive queues at Dover and resulting in food being left to rot in trucks at the border.
This is a programme of national importance that could have a huge reputational impact for the UK if it is not delivered successfully.
The uncertainty regarding the outcome of UK-EU negotiations is a complicating factor but it should not be used by HMRC to avoid taking action now in areas including: scaling up the CDS service to handle 255 million declarations; ensuring a viable contingency option is in place well before January 2019; and communicating with traders.
Financial and operational implications of not acting now
There are financial as well as operational implications of not acting now. This is a tight timetable at the best of times. With the hard deadline of Brexit, delay is not an option.
The Treasury needs to ensure there is funding in place to develop contingency options so that there are no barriers to continuity of service. HMRC also needs to do a lot more to work with the many businesses affected.
Much remains to be done to have an effective Customs Declaration Service in place, on time, and that traders know how to use.
We intend to keep a close eye on this programme and expect to review progress early in the Summer of 2018, following a further review by the NAO.
The report forms part of the Committee's ongoing examination of aspects of the UK's departure from the EU. The Committee will take evidence on Brexit and the UK border on Monday November 20.
Comment from Public Accounts Chair, Meg Hillier MP:
"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. 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."