Despite insistence from UK Chief Negotiator David Davis that the new customs systems that is being introduced in the UK is on track, the Chief Executive of HMRC Jon Thompson has told a Public Accounts Committee that there is no guarantee it will be ready if the UK were to crash out of the EU without a trade deal.

The Customs Declaration Service (CDS) is expected to be in place by January 2019 and it’s estimated that customs declarations would increase from around
55 million to over 250 million if the UK leaves the EU and checks are required.

Mr Thompson reportedly told the Commons Public Accounts Committee last month that he could not give a guarantee that an IT system could work until after it is up and running and said the project did carry risks. These risks stem from testing volumes, performance levels, migration from CHIEF to CDS and user-readiness. With testing scheduled to complete in June 2018, a decision is expected to be made in July 2018 on whether the CDS is fit for purpose.

If HMRC are preparing for a no-deal Brexit, they may need to rely on the current customs system CHIEF (Customs Handling of Import and Export Freight) if CDS is not ready. The downside of this is that CHIEF is not compatible with the new EU law which mandates that all communications within a customs system must be electronic by December 2020. HMRC stated that it is working on this contingency plan but as CHIEF can only handle a maximum of 100 million transactions, the system does need to undergo a significant upgrade.

On the border on the island of Ireland, the HMRC reiterated that they are examining possible options to avoid having physical infrastructure at the border. Some options on the table are a derogation for traders with low turnovers and the use of a trusted trader scheme.

With little clarity of how trade talks will go and therefore no clear indication of how much capability the new system will be required to have, HMRC are operating in difficult and uncertain times.