The Customs Digital System (CDS) is a very ambitious and overdue overhaul of how HMRC deals with customs. The existing system CHIEF (Customs Handling of Import & Export Freights) is based on legacy IT and Government has rightly acknowledged it needs replacing with a futureproof system that fits in with our smarter state and digital transformation agendas.
CDS originally came about to help HMRC implement new European customs laws, but (ironically) now needs to be re-scoped to manage customs after Brexit, a process that could derail the project.
Brexit is the primary risk to CDS according to the National Audit Office (NAO) as it means CDS has to be ready a year early and handle five times the amount of transactions it was designed to. Brexit means the 200 million EU declarations that would basically be waved through now need to be processed and this alone could make CDS collapse. Furthermore supporting systems (like SPIRE-LITE export controls and VAT) also need to be compatible and the EU 27 need to adapt their customs processes and IT to manage UK imports and exports.
Combined with other project risks (identified by the NAO as insufficient industry engagement, uncertain rules and project staff turnover), the tech sector faces even more uncertainty and needs to know now what the contingency plans are. Customs should also be a negotiating priority so customs authorities and businesses across Europe know what the rules will be.
Whilst the CDS faces some serious challenges, we shouldn’t be too harsh on HMRC here. Before the referendum it was a well-regarded project sensibly timed to be delivered in phases up to 2020. Brexit means HMRC has lost a year of testing and designing a system to enforce rules that don’t exist yet and keep goods and services flowing now. They are very much between a rock and a hard place and this is another reason why there needs to be at least a three year transitional deal.
With all this in mind we look forward to hearing from HMRC CIO Mike Potter on Thursday morning at #techUKPS2030 and we urge him to spell out what is happening with CDS and how HMRC is managing these risks.
For more blogs like this in the lead up to the #techUKPS2030 conference, please visit our Insights blog here.