The National Audit Office has today published its report on the progress of the Customs Declaration Service (CDS) programme, setting out facts about the programme and highlighting the risks and issues that HMRC is managing ahead of implementation of the new service by January 2019.
In 2013-14, HMRC started plans to replace its customs system, known as CHIEF, following changes to EU legislation which would have been costly and difficult to make on its ageing technology. CHIEF collects around £34 billion in tax and duty on imports from countries outside the EU each year. In 2015-16, it processed around 55 million import and export customs declarations. In 2015 nearly £700 billion of goods crossed the border. The continued smooth operation of these crossing is critical to the UK economy.
HMRC is replacing CHIEF with a new Customs Declaration Service (CDS). The CDS programme is one of 15 major programmes in HMRC’s wider transformation portfolio. HMRC started the programme before the UK voted to leave the EU in June 2016, and before the government committed to seeking a new customs arrangement from March 2019.
HMRC has made progress in designing and developing the new Customs Declaration Service, however there is still a significant amount of work to complete, and there is a risk that HMRC will not have the full functionality and scope of CDS in place by March 2019 when the UK plans to leave the EU. HMRC recognises this risk. Particular risks to programme delivery include: the time contingency available to HMRC; the technical challenge of integrating the different elements of the CDS system; the potential increase in volumes following the UK’s decision to leave the EU; stakeholder engagement and transition planning; the programme management approach adopted; resource gaps; and potential for additional costs.
The programme is also currently operating with some uncertainty due to the unknown outcome of the UK/EU negotiations, and no changes have yet been made to the scope of the CDS programme following the UK’s decision to leave the EU. Any changes to the new system requirements made shortly before the planned implementation date would increase the risk of additional cost or delay to the programme. While HMRC is working to manage the risks and issues, and is developing contingency plans, wider government must choose now whether it needs to do more to help HMRC to mitigate the risk of the system being needed, but not ready in time.
“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.”
Amyas Morse, head of the National Audit Office, 13 July 2017
Notes for Editors
HMRC's current estimate of the maximum number of customs declarations per year after March 2019 based on current levels of UK/EU trade, subject to the new customs arrangement negotiated with the EU – around a 200 million increase on the 55 million existing declarations each year
Is the date by which HMRC expects all traders to use its new customs system. This is two months before the UK intends to leave the existing European Union (EU) customs union
Approximate value of customs and excise duties and value added tax collected by HMRC at the border annually.
8,700 Users and intermediaries, including freight suppliers, customs agents and software providers directly affected by the new customs system (approximate).
Traders currently estimated by HMRC who will make customs declarations for the first time under the new system, assuming the UK leaves the EU customs union. This is in addition to the 141,000 traders who currently make customs declarations for trade outside the EU.
£696 billion estimated trade in goods across the UK border in 2015.
The NAO report does not evaluate the overall value for money of the programme. It also does not cover other aspects of the government's overall customs regime which are outside the scope of the programme, including wider infrastructure and resource changes following the UK’s decision to leave the EU.
Press notices and reports are available from the date of publication on the NAO website. Hard copies can be obtained by using the relevant links on our website.
The National Audit Office scrutinises public spending for Parliament and is independent of government. The Comptroller and Auditor General (C&AG), Sir Amyas Morse KCB, is an Officer of the House of Commons and leads the NAO. The C&AG certifies the accounts of all government departments and many other public sector bodies. He has statutory authority to examine and report to Parliament on whether departments and the bodies they fund have used their resources efficiently, effectively, and with economy. Our studies evaluate the value for money of public spending, nationally and locally. Our recommendations and reports on good practice help government improve public services. Our work led to audited savings of £734 million in 2016.