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The Treasury Committee has lost confidence in the successful implementation of HM Revenue and Customs’ (HMRC) new customs check IT system and is concerned with the implications of potential failure.
HMRC’s customs declaration service (CDS) aims to replace the current system for handling import and export freight from outside the European Union (EU).
The current system, which has been in place for 25 years, can only handle around 60 million customs declarations per year. With Britain leaving the EU in two years’ time, the new system must be able to handle much larger numbers.
However, the replacement project has gone from being rated green by the Infrastructure and Projects Authority (IPA) in November 2016, to the IPA changing the rating to amber or red, meaning it is “in doubt”, with “major risks”. This has led to concerns over the readiness of the new system by the time Brexit comes into effect.
Chairman of the Treasury Committee, Andrew Tyrie, said that in just 67 days, from November 2016 to January 2017, “confidence in the successful implementation of the CDS – a project that HMRC itself describes as ‘business critical’ – has collapsed”.
“Customs is at the heart of the Brexit debate. It is part of the essential plumbing for international trade, and ensuring it continues to function smoothly post-Brexit has to be a priority for the government,” he said.
“The CDS is needed to handle a possible five-fold increase in declarations that could occur when the UK leaves the EU. The consequences of this project failing, or even being delayed, could be serious. Much trade could be lost, therefore merits a high degree of scrutiny by parliament.”
In a Treasury Committee hearing last month, Jim Harra, tax assurance commissioner and director general of customer strategy and design for HMRC, told the committee that the department already has a programme underway to make changes to its IT systems.
The new CDS system is due to go live in early 2016, “and, having re-scoped what it is we need to do to cope with whatever comes out of the exit negotiations, fortuitously we think that new IT platform will help us to deal with that”.
“We expect CDS to come online earlier than that. We expect to have completed the cutover and migration by early 2019, because there will be a period of dual running of our existing system and our new system to enable the trade to make the transition they need,” he said.
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Following the committee meeting, Tyrie wrote a letter to Harra, asking what the department’s contingency plans were should the system not be ready by the time the UK leaves the EU.
Replying to Tyrie, Harra said HMRC “is prioritising the delivery of CDS for day one of the UK leaving the EU” and that the system will be implemented in a phased roll-out with the current system, called the Customs Handling of Import and Export Freight (Chief) service being operated “in tandem with CDS during the transition”.
“We are also planning for a technical upgrade to increase the stability and capability of the current Chief service,” he said. “In addition, our contingency plans will include building on the existing manual fall-back procedures already in place for the current Chief service.”
Last year, the director-general of the UK Association for International Trade told the Financial Times he was also concerned with the replacement system’s ability to cope with Brexit.
“The existing system will be not be able to cope and there is not much confidence that the untested and still incomplete replacement, CDS, will fare much better,” he said.
Tyrie has also written to IPA CEO Tony Meggs noting his concerns that the project will be delivered “successfully and on time”, askng for the IPA to conduct a confidence assessment of the project.
“The assessment should provide a full description of the principal risks to the project, an assessment of the adequacy of the contingency plans in the event of delay or failure, and an explanation for the rapid deterioration in the project’s status over the space of two months,” he said.
HMRC is also reviewing 24 other systems that may require changes in order to be ready for day one of Brexit. These include the National Computerised Transit System, the system used for duty stamps and the departmental trader register.