The head of HMRC has suggested businesses could face annual administration costs of up to £20bn depending on which option the UK selects for handling customs and trading with the EU post-Brexit and warned it could take several years for new systems to be up and running
Giving evidence to the Treasury select committee, HMRC CEO Jon Thompson said the so-called ‘maximum facilitation’ (max fac) solution would require companies to draw up UK customs declarations.
This option uses technology to track the movement of goods and vehicles, under a ‘trusted trader’ approach, and would not require the existence of a hard border in Ireland.
However, Thompson pointed out the average cost of a customs declaration is £32.50 and there are around 200m export consignments a year, with additional costs on the EU side of the border. That creates £6.5bn of costs each way, totalling £13bn, while there would be an additional £4bn to £7bn needed to cover the costs of meting rules of origin compliance and other forms.
Thompson said: ‘So you need to think about the highly streamlined customs arrangement costing businesses somewhere in the late teens of billions of pounds, somewhere between £17bn and £20bn.
‘The primary driver here is the fact that there are customs declarations.’
The costs of one of the alternatives under consideration, the customs partnership model, would be much less, at around £3.4bn a year in total.
If implemented, Thompson suggested this might fall to ‘a net cost of zero or less, depending on the tariffs drawn up by the UK and Brussels, because businesses could claim them back.’
This approach would see the UK collect tariffs on behalf of Brussels for goods that are travelling via the UK on their way to the EU, but Thompson cautioned that developing the necessary computer systems to handle the transactions was likely to take up to five years.
Thompson also indicated in his evidence that UK businesses might need to develop or enhance their in-house systems to meet new customs requirements, which would take time and money, while the current uncertainty surrounding which option the UK will choose meant little development had taken place. Whichever solution is chosen, HMRC will need an additional 5,000 staff.
In a statement, Teresa May’s office said: ‘The prime minister has asked for work to be done on both customs models. That work is ongoing and therefore any speculation about implementation is just that.’
Report by Pat Sweet
