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Significant challenges remain with HMRC’s customs IT system, says NAO

HM Revenue and Customs has reduced “some risks” in its customs declaration service’s readiness for Brexit, but the tight timetable remains a “major challenge”, says National Audit Office

Lis Evenstad
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Published: 28 Jun 2018 11:07

The National Audit Office (NAO) is still concerned about HM Revenue and Customs’ (HMRC) new customs declaration service (CDS) as Brexit approaches, despite the department making significant progress.

The CDS is intended to replace the current Customs Handling of Import and Export Freight (Chief) system for handling import and export freight from outside the European Union (EU). HMRC maintains it is on track to deploy the system, beginning in August 2018. 

Originally, HMRC had planned to design and build the full system by July 2018, but has said CDS will now be fully deployed by January 2019. However, an NAO report on the programme said: “Significant challenges remain and there is a risk that CDS will be unable to fully replace the existing Chief system by January 2019.” 

The phased deployment of the new system means that HMRC “will not know whether CDS works in live service until it has implemented all the functionality in December 2018”,  the NAO report said.  

“The late release of functionality and migration of users increases the risk that HMRC will not have sufficient time to resolve any issues it might identify with the last release and some traders will, as a result, remain using the existing Chief system for longer,” it added.

There are major differences between the old and the new systems. Chief has never handled more than about 60 million transactions a year, whereas the maximum number of customs declarations CDS would have to handle after Brexit is an estimated 255 million a year, based on current volumes of trade.   

HMRC will begin to migrate users from Chief to CDS in August, but the NAO said it is unlikely to complete this by January 2019. The export functionality of the system will not be released until December, said the NAO, which means that traders who export goods will have only one month to complete the process.

“HMRC’s phased release strategy means traders involved in the first release will have to support a further two releases and associated changes to their own systems and processes before the end of the year, and will leave some users with less time to migrate,” the NAO report said.

“HMRC plans to continue to run Chief in parallel with CDS to mitigate the risk of migration not being completed on time. However, it may also lead to traders continuing to use Chief for longer than necessary, which could also delay the completion of migration.”

In March 2018, the NAO conducted a survey of community system providers and custom software suppliers that will have to change their systems to enable traders to make customs declarations. The survey revealed that most of them did not know what changes they would need to make, or when their systems would be ready.

Contingency plans

The NAO report said HMRC has made significant progress since its July 2017 report on CDS, when it had significant concerns around the viability of deploying the system on time.  

Since then, HMRC has upped its contingency, including plans to upgrade the Chief system to enable it to handle more transactions.

“If it successfully completes this work, HMRC should have the system capacity to handle customs declarations no matter what the outcome of negotiations between the UK and the EU,”  said the NAO. “HMRC is confident that Chief will be able to handle the increased volume of declarations, and that it remains a reliable system that is suitable for a short-term contingency arrangement.”

Meanwhile, HMRC has put nearly 40 technology projects on hold to focus on getting customs IT right in time for Brexit.  

NAO head Amyas Morse said the development of the system to a tight timetable “remains a major challenge”.

He added: “However, HMRC has made progress in developing its contingency plans, and has reduced the risk of it not having an operational system in place next March. Inevitably, risks remain, and the next few months are crucial if HMRC is to make this a success.”

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