The chief executive of HM Revenue and Customs has told MPs that the tax agency “remains on track” to scale up its customs system to cope with an expected fivefold workload increase following Brexit.
Permanent secretary Jon Thompson wrote to meg Hillier, the chair of the Commons’ Public Accounts Committee, to update her on progress made on the programme, which he said had been given “an amber/green rating” by the Infrastructure and Projects Authority (IPA) in March 2018.
His letter, dated 28 March, followed a PAC report from November outlining concerns that funding had not yet been made available by Treasury for the programme, and that HMRC had an “unsustainable” amount of other transformation projects in the offing.
In his response published this week, Thompson told PAC chair Meg Hillier that the customs work had been prioritised and had the funding it needed. He also said the agency will soon announce details of projects to be delayed or aborted following a review of all 267 projects in HMRC’s portfolio.
Work to replace HMRC’s customs system, Customs Handling of Import and Export Freight (CHIEF), with a new system, the Customs Declaration Services (CDS), began in 2013-14, before the EU referendum took place.
After the vote it became clear the customs system would need to be able to handle an estimated 255 million declarations a year post-Brexit – five times more than the 55 million made by traders in 2015.
In his letter, Thompson outlined the work HMRC has done since October last year to inform traders of the timeline of changes, to test capacity and usability of the new system, and to develop contingency plans should CDS be “significantly delayed”.
These contingency plans include running CHIEF in tandem with CDS while transitioning between the two systems, refreshing the CHIEF IT infrastructure so it can be scaled to cope with processing a higher volume of customs declarations, and exploring other technology and process changes that may be required.
Existing CHIEF users will start to migrate across to CDS in August 2018, and the CDS system aims to be fully operational by January 2019.
“CDS is being designed, developed and built to have the flexibility to meet the challenges of change to tariffs, free trade agreements and international trade quotas,” Thompson said.
The perm sec also insisted that the CDS programme has the funding it needs to increase capacity to handle up to 300 million declarations a year.
“CDS is a top priority programme within government and HMRC receives the support it needs. We have the capability required to deliver CDS, and we have prioritised delivery of CDS for Day 1 of EU exit,” he said.
“The programme has the funding that it currently requires (although we recognise that further costs may arise as a consequence of EU exit), and is on course to deliver as planned.
“HMRC has been allocated an additional £260m of funding for Brexit related costs for 2018-19 and this, together with the core HMRC budget gives sufficient funding for CDS and CHIEF for 2018-19.”
Thompson told the PAC during a hearing in October last year that HMRC needed to do a full reprioritisation exercise. “I do not believe it possible to take 250 existing programmes of change and simply add Brexit on. I think you reach the point of organisational capacity,” he said.
Responding in his letter to a request from Hillier that he update her on this exercise, Thompson said the tax agency had completed a review in January 2017 of its 267 projects, including Brexit work, that were underway or planned by September 2017. These were assessed against seven criteria.
Proposals were put to Treasury ministers in February, including “a number of projects which should stop, or not start and a number which should be stretched out over a longer time scale”, Thompson said.
“We will update the committee as soon as final decisions have been taken,” he added.
The perm sec added that HMRC was aware that a lot more work needed to be done, and that it was important to “retain tight control of our risks”, but that he was “reassured” by the IPA amber/green rating for CDS.