HMRC rapped as Brexit looms and customs IT release slips again

Public Accounts Committee 'concerned' businesses haven't been told how to prepare

sands of time

British MPs have chastised HMRC over further slippage in the tax collector's efforts to replace the UK's customs IT systems ahead of Brexit, and its lethargic attitude to preparing traders for a no-deal scenario.

They are also less than impressed that the department had not better prepared for the government's "foreseeable" decision to introduce postponed accounting for import VAT.

The UK's taxman was already planning to replace its outdated customs IT system, CHIEF (Customs Handling of Import and Export Freight), with the Customs Declaration System (CDS) before the UK voted to leave the EU.

But now the work is under increased pressure to meet the tighter deadline and to handle a surge in declarations – this could rise from 55 million to as much as 255 million after Brexit.

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The influential Public Accounts Committee has followed HMRC's progress closely, especially as the possibility of a no-deal exit becomes more real.

The department's chief executive, Jon Thompson, has been insistent that systems will be able to cope with a no-deal – but the committee is decidedly more sceptical.

In a letter to the exec yesterday, chair Meg Hillier summed up the mood (PDF) by saying: "We do not share your optimism and expect you to inform the committee immediately if... you determine that tax revenue due from the start of 2019-20 is at risk if there is no deal."

There are a number of facets to HMRC's preparations for Brexit, with the creation of CDS a main focus. Although Thompson had repeatedly assured MPs it was on track, he last month admitted that the final release of CDS was being pushed back to March 2019.

This means CHIEF will have to keep running in parallel for longer than expected, and stress tests to see if it will cope were only halfway through.

In her letter, Hillier said the MPs were "disappointed" that despite repeated assurances about the progress of CDS, "there has yet again been a slip in the timing of the programme".

Another bone of contention has been the department's communications with the businesses that will need to use the new systems, especially as many of those who haven't declared customs before will need to do so if the UK crashes out of the bloc without a deal.

HMRC has been somewhat slow in its efforts in this regard, although some of this is due to the political need to stay tight-lipped before details are presented by government.

Nonetheless, it was clear from last month's evidence session that this work was still in the early stages – despite the committee having raised concerns about communication back in July.

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"I am both concerned and disappointed that nearly two months on you have made little progress," Hillier wrote. "You gave us no assurance that HMRC has a plan to ensure that businesses are aware of what they will need to do."

In particular, there are 100,000 or so small traders that HMRC is not in contact with, and so can't reach out to directly.

Hillier called on the department's leaders to update the committee on the level of understanding and preparedness for changes to the customs rules and procedures if there is no deal.

The chairwoman also expressed impatience with the leaders for having failed to plan ahead for a no-deal scenario.

This will see acquisition VAT – for movements between the EU and UK – replaced by import VAT, which is usually collected earlier. In order to avoid a cashflow disadvantage for businesses, the government will introduce postponed accounting for all import VAT.

HMRC said last month that this would pose "quite a challenge" for the department, and that it had only just started talking to software developers to make the necessary changes. Resources will need to be diverted, possibly from the latest CDS release, to get this in place by March.

But Hillier questioned why the department hadn't seen this coming. "The potential move to postponed accounting is something that was foreseeable and it is reasonable to expect you to have been better prepared for it."

She did, however, end her letter by emphasising that the committee was aware of the scale of the challenge. ®




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