Parliament “not optimistic” that HMRC will be ready for Brexit

Chair of Parliament’s ‘Public Accounts Committee’, Chair Meg Hillier has written HMRC Permanent Secretary, Jon Thompson, expressing concern that HMRC will not be ready to lead firms through preparing for and making the transition to post-Brexit trading.

The letter, which can be read in full using the link below, notes that tax officials had not yet identified the more than 100,000 small firms who will be affected by new customs arrangements when the UK leaves the EU on 29 March 2019.

Government estimates put the number of traders and suppliers declaring customs to the tax office at the border doubling to around 300,000 - while the number of declarations could increase five-fold to 255 million - depending on the outcome of Brexit negotiations.

Ms Hillier said: “I am both concerned and disappointed…that you have made little progress.  You gave us no assurance that HMRC has a plan to ensure that businesses are aware of what they will need to do.

“We are particularly concerned about the 100,000 small traders that HMRC cannot engage directly with, as you do not know who they are.”

Thompson appeared before the committee as they examined the readiness of a new, digital customs declaration service (CDS) – a system to monitor goods coming in and out of the UK, post-Brexit.

Following a series of delays, the system is now scheduled to be ready for use in January - just two months before Brexit begins.

Delays in introducing the CDS may well mean that it will have to run alongside the present system ‘CHIEF’ – adding to the costs of doing business abroad even further.

MPs and civil servants fear that should CDS not be ready to go live before Brexit, it will lead to long delays at ports and airports.  Head of the National Audit Office, Amyas Morse, is on record as saying it would be a “horror show” if the CDS isn’t ready – meaning officials are forced to manually process imports and exports.

HMRC has attempted to allay those fears, insisting plans to ensure there will be a fully-functioning customs, VAT and excise system in the event on a Brexit no-deal are “well developed”.  A spokesperson said: “We have always said the timeline for implementing the CDS is tight, but that we would operate the current system [CHIEF] in tandem throughout the transition.

“We have made good progress to ensure that the UK has a customs system capable of handling any potential volume of customs declarations after March 2019.”

At the same time, the Federation of Small Businesses, which represents 168,000 members from the SME community across the UK, warned a no-deal Brexit poses a “clear and present threat to small businesses”, that “must be avoided at all costs”.

FSB National Chairman Mike Cherry said the results of the research paint a “deeply troubling” picture that an exit from the EU without a deal could cause “significant damage” to small business.

The organisation surveyed 1,234 small businesses with under 250 employees in September, revealing:

  • only 14 percent (one in seven) of firms have started planning for a no-deal Brexit;

  • 41 percent are worried their business will be ‘significantly’ impacted by a cliff-edge no-deal Brexit;

  • half of all SMEs (48 percent) said a no-deal will have a negative effect on their ability to do business;

    • this rises to 66 percent for those trading with the EU; and

    • and to 61 percent for those that employ staff from the bloc.

  • About third (35 percent) said they would be forced to postpone major business decisions.

Brexit Partners

We cannot help putting the two news items together.  If the FSB survey results were not sufficiently worrying, how much worse will the outlook become when the full extent of the delays in commissioning the digital customs platform be – and the full implications of the Technical Notices are understood?

Brexit-Partners have been cataloguing the slew of no-deal ‘Technical Notices’ - now covering over 150 areas of individual, business and investment life – and with the next tranche due shortly.

We agree with the FSB in thinking that the Technical Notices that have been released over recent weeks don’t make the situation clear enough.  Contact us at Brexit Partners (enquiries@brexit-partners.com) for interpretation and guidance on any aspect of your business that you believe may be impacted by Brexit.


 
John ShuttleworthComment