HMRC fails to get new customs system ready for Brexit

HM Revenue and Customs (HMRC) has spent millions of pounds to enhance an old system to handle customs after Brexit rather than prioritising its planned replacement, a National Audit Office (NAO) report has found.

HMRC will be using its legacy platform, Customs Handling of Import and Export Freight (Chief), if the UK leaves the EU without a deal on 31 October 2019.

This is because the replacement, the Customs Declarations Service (CDS), will not be ready to support increased volumes of goods moving under transit arrangements and requiring checks. CDS is being developed to handle and risk-assess customs declarations and account for payment of duties as a replacement for Chief.

The NAO had already noted that HMRC was behind schedule on the delivery timescales for CDS in February 2019, but the situation has become worse, according to the latest report. The reason for the delay is that software developers at HMRC have had to focus on Chief rather than the new system, due to Brexit.

According to the NAO, the priority was to add functionalities to the legacy platform for the event of no-deal Brexit, such as the ability to handle the additional customs declarations that may be required, as well as other functional changes.

The focus on Chief has also meant HMRC had to extend its contract with Fujitsu for another year to support the legacy platform at a cost of £12m. The department is considering extending the contract even further, but that has not been decided yet, according to the NAO.

“It is not always straightforward for government as a whole to prioritise the various activities involved in managing a safe and effective flow of people and goods, and the collection of revenue,” the report said.

“In the event of a no-deal exit, the government has decided to prioritise security and safety; flow of people and goods; and then compliance activity, including the collection of revenue,” it added.

While the migration to CDS has begun at a small scale, HMRC’s plan is to continue running Chief in parallel with CDS until all traders have been migrated.

Chief currently handles 55 million customer declarations yearly and, according to the report, HMRC tested the system’s ability to cope with the estimated increase in declarations in the event of no deal, with up to 300 million declarations per year.

The HMRC system connects with several border-related platforms, such as the Import of Products, Animals, Food and Feed System (IPAFFS), a system that issues outcomes of biosecurity and food safety checks on imported goods, under the responsibility of the Department for Environment, Food and Rural Affairs (Defra).

Defra is developing IPAFFS, as well as a contingency, to monitor and control the import of animals, animal-related products, high-risk food and feed from the EU and other countries, replacing use of the EU’s Traces system. According to Jo Broomfield, EU exit delivery director at Defra, IPAFFS is among the most crucial systems for the department.

“We’re currently using EU systems for some of those border functions and we had to assume we would no longer have access to those systems,” Broomfield told Computer Weekly in June 2019, adding that the system was ready to be used on 29 March 2019 if needed.

According to the NAO, departments had put in place most of the arrangements they considered necessary for a no-deal exit, but risks remain.

“The government has made progress with putting in place the systems, infrastructure and resources required to manage the border if the UK leaves the EU without a deal,” the report said.

“However, there is still some work to do to finalise arrangements in the short time that remains, and bringing all these elements together for the first time in a live environment carries inherent risk.”