Public Services > Central Government

NAO issues key warning over HMRC’s CHIEF customs system replacement

David Bicknell Published 13 July 2017

Watchdog’s warning over CDS progress illuminated by Amyas Morse comments on impact of system delays on Brexit plans, with potential problems likened to a ‘chocolate orange’ falling apart


A National Audit Office (NAO) report into HM Revenue & Customs (HMRC) progress in developing the successor to its long-standing CHIEF customs system has warned there is a risk that the new Customs Declaration Service (CDS) may lack full scope and functionality by the time the UK plans to leave the EU in March 2019.

The report was given added clout by much reported, colourful quotes from Amyas Morse, head of the National Audit Office, that UK Brexit plans could collapse like a ‘chocolate orange’ and a ‘horror show’ if the new customs IT system is not ready.

The NAO report details how in 2013-14, HMRC started plans to replace its well-regarded, but ageing CHIEF system following changes to EU legislation which would have been costly and difficult to make on its old technology.

CHIEF helps collect around £34bn in tax and duty on imports from countries outside the EU each year. In 2015-16, it processed around 55m import and export customs declarations. In 2015 nearly £700bn of goods crossed the border. The continued smooth operation of these crossing is critical to the UK economy.

CDS is one of 15 major programmes in HMRC’s wider transformation portfolio, which HMRC started before the UK voted to leave the EU in June 2016, and before the government committed to seeking a new customs arrangement from March 2019.

The NAO accepted that HMRC has “made progress in designing and developing the new Customs Declaration Service”. But it warned, “there is still a significant amount of work to complete, and there is a risk that HMRC will not have the full functionality and scope of CDS in place by March 2019 when the UK plans to leave the EU.”

It added that HMRC recognises the risks it faces. Particular risks to the programme’s delivery include the time contingency available to HMRC; the technical challenge of integrating the different elements of the CDS system; the potential increase in volumes following the UK’s decision to leave the EU; stakeholder engagement and transition planning; the programme management approach adopted; resource gaps; and potential for additional costs, the NAO said.

It pointed out that the programme is also currently operating with “some uncertainty” due to the unknown outcome of the UK/EU negotiations, and no changes have yet been made to the scope of the CDS programme following the UK’s decision to leave the EU. Any changes to the new system requirements made shortly before the planned implementation date would increase the risk of additional cost or delay to the programme.

The NAO added that while HMRC is working to manage the risks and issues, and is developing contingency plans, “wider government must choose now whether it needs to do more to help HMRC to mitigate the risk of the system being needed, but not ready in time.”

Morse said, “HMRC has made progress in developing the new customs system, which was part of its existing programme, but it may need to be ready much earlier than originally planned if there is no agreement extending timescales on the transition to any new customs arrangements. Customs problems have obvious implications for the flow of goods in and out of the UK, so Government as a whole needs to decide whether the extra cost and effort of getting a working system in place for day one is an insurance premium worth paying.”

An HMRC spokesperson said, “The Customs Declaration Service (CDS) is on track for delivery by January 2019 and will support international trade once the UK leaves the European Union. 

“We took the decision to bring in a new declaration system before the EU referendum, but the service remains fully capable of dealing with how the UK’s exit from the EU will impact on customs declarations at the border.”


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