Covid-19 pandemic has significantly affected HMRC’s operations, says NAO

A National Audit Office (NAO) report into HM Revenue and Customs’ (HMRC) annual report and accounts found that the Covid-19 coronavirus pandemic has led to challenges for the department and that its IT systems will require “significant investment if future plans for transformation are to achieve their planned benefits”.

It said that the impact of Covid-19 on the department’s flagship digital benefits system, Universal Credit, and the timeframe to transfer claimants onto Universal Credit is uncertain.

A previous NAO report on the system, published in July 2020, found that the costs of establishing the new digital infrastructure and benefits system have increased from £2bn in the original full business case in 2018 to £2.85bn.

HMRC is also working to deliver the new Customs Declaration Service (CDS), which is due to replace the old Customs Handling of Import and Export Freight (Chief) system.

HMRC’s annual report and accounts said there is a risk to the delivery of CDS, and rated the project amber.

“We continue to work with our key delivery partners to ensure HMRC and traders are ready for the end of the transition period,” the annual report said.

“We will continue to dual run CDS and Chief beyond the end of December 2020, [and] ensure we have the IT, operational and policy requirements in place to support the UK’s exit from the EU.

“Delivery timescales remain challenging and have been further affected by Covid-19. Further challenges are presented by the volatile nature of the changes required and the potential for further changes to scope as some requirements won’t be finalised until negotiations conclude.”

Another NAO report, published 6 November, said that HMRC was due to turn off Chief by March 2020, but the report said the department “is now expecting to have to continue to run Chief as part of a dual approach in which traders would use Chief for customs declarations relating to imports to Great Britain, and CDS for those relating to Northern Ireland, until CDS has been scaled to be able to handle increased volumes of customs declarations”.

HMRC’s programme to digitise the UK tax system is also at risk of delivery. The programme has been rolled out to businesses above the VAT threshold, and is now being used by more than 1.47 million customers, according to the department. Its self-assessment pilot programme is also open to around one million customers, but the department said uptake is limited.

“We continue to deliver additional and enhanced service for these customers while managing risks and challenges caused by the impacts from Covid-19 and EU exit,” the annual report said.