Public Services > Central Government

HMRC warns CDS customs system timetable ‘tight’ but delivery remains ‘on track’

Matteo Natalucci Published 15 September 2017

Treasury committee evidence session with HMRC discusses CDS delivery timetable and contingency plans, the Childcare Service website and a ‘flawed’ tax credits system


HM Revenue & Customs (HMRC) has painted an upbeat picture of its customs IT systems’ readiness for Brexit.

It has said delivery of the new Customs Declaration Service (CDS) system remains on track, but warned that the timetable for delivery will be tight.

HMRC executives, including chief executive and permanent secretary Jon Thompson, were appearing in front of the Treasury Select Committee yesterday in its first evidence session of the new parliamentary session. On the agenda were customs systems progress, including CDS, and the Childcare Service website.

The committee was chaired by Nicky Morgan and MPs also heard from HMRC’s director general, customer strategy and tax design Jim Harra, and from Nick Lodge, director general, transformation

Thompson said, “There is an unprecedented level of technological change in HMRC. We are attempting to digitise the entire tax system at the moment and (Brexit customs changes) would be added on.”

“The programme continues to meet critical milestones for IT development, and we have built an environment that mirrors the live environment to support development activity ... CDS has completed 43% of features and requirements. However not all features are the same size so we have actually completed more than 50% of the total development effort. Completed means built, tested and signed-off.”

He went on, “The delivery timetable is tight, but we remain on track to complete delivery of the new CDS system in August 2018 and transition users onto the new system by January 2019. While there are always risks that the programme might encounter unforeseen problems later, there is currently nothing to suggest that this timetable will not be achieved.”

“The programme has had to contend with constricting timelines and a huge change in some requirements. Non-delivery would leave the UK facing significant disruption on day one,” he said. “I’m reasonably confident [CDS] will happen. [It] is on time. But I can’t guarantee that everything is going to be fine because there’s another year to go.”

The committee also enquired about the provisions of transnational arrangements after the UK leaves the EU and the tax credit system.

Thompson, discussing managing customs after Brexit, said, “Do we have the money or the resource at this point? Being frank, no we don’t. We would need to increase our capacity and capabilities to implement that project... it is technologically challenging and it is a project in hundreds of millions of pounds”.

Harra estimated the organisation could require an additional 3,000 to 5,000 people by March 30 2019 to cope with the increased customs demands on Brexit day one. Indeed, HMRC estimated that an additional 130,000 new companies that import and export with the EU alone will have to come into contact with British customs after Brexit.

“There are probably about 130,000 new businesses that will be dealing with customs for the first time and there is a big challenge in reaching them, supporting them and getting them to be able to comply with their obligations on a transitional basis as well as on an ongoing basis,” Harra said.

HMRC’s customs contingency plan is expected to have the existing CHIEF system continue running alongside CDS in case CDS is not ready in time. HMRC is currently working to make CHIEF capable of handling greater volumes than its current 60 million customs declarations per year limit.

“Despite these government IT challenges, new and innovative technology is being touted as the answer to the Brexit customs problem. With less than two years to deliver and no clear idea of what this ‘new technology’ is, ministers must be clear about what is and what is not feasible,” HMRC said.

Turning to HMRC’s problems with the Childcare Service website, chair Nicky Morgan said, “It’s concerning that some parents have struggled to apply for childcare funding due to technical issues with the government’s childcare service website. To make matters worse it appears that the childcare service helpline for parents suffering problems with the website is also experiencing technical difficulties.”

The Childcare Service portal was set up earlier this year to allow eligible parents and carers to apply for tax-free childcare worth up to £2,000 per child per year and to receive 30 hours of free childcare a week.

Thompson acknowledged the fact that some parents and childcare providers had experienced difficulties accessing the online service and apologised for the inconvenience. Yet, he stated that more than 180,000 parents have successfully applied for a childcare account.

“We’ve now made significant improvements based on customer feedback and on average more than 2,000 parents are applying successfully every single day. We continue to make updates to improve the customer experience and ensure everyone can easily access their account.”

Thompson also told MPs that HMRC’s fraud and error rate for Tax Credits is likely to rise from 5.5% to 7.5% in the next two years, due to a “deeply flawed” benefits system.

 “The Tax Credits system is deeply flawed, the policy was deeply flawed – it was trying to achieve too many things with a benefit that has an annual cycle, which then requires a reconciliation at the end of the year about everything that has changed within the course of the last 12 months,” Thompson said.

Thompson said, “The level of fraud and error in the system – mostly error – therefore, is very, very high. The target is that we should try to get to 5%. We are not going to be able to get to that. It is my opinion that for however long Tax Credits is in place, and remember the government’s strategy here is to ultimately migrate everything to Universal Credit – so there will be an end to Tax Credits – we’ll be qualified until the end of Tax Credits.”

Labour MP Alison McGovern asked Thompson about HMRC’s gender pay gap.

Thompson said he believed the pay gap would be within 2% at all grades. He said, “We do not believe we have got a pay-gap problem,” he said. “We are a majority female employer.”

Thompson said he would write to the committee with grade-by-grade details of gender pay within HMRC.


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