The government faces “significant challenges” in getting its customs declaration system up and running in time for Brexit, according to the National Audit Office (NAO).

The warning comes in the NAO’s latest report on the progress of HMRC programme to replace its existing customs system, CHIEF (Customs Handling of Import and Export Freight), with a new Customs Declaration Service (CDS).

Currently CHIEF processes around 55 million customs declarations a year, with that figure predicted to rise to 255 million once the UK exits the EU in March next year.

The NAO report reveals that CDS, which was due to be launched next month, will not be fully rolled out until December, due to development delays and problems integrating the system with HMRC’s finance system.

The report warns: “These issues mean HMRC has been unable to complete its development work according to the original timetable and will not deliver all the CDS functionality by August 2018. In August, HMRC expects to have around 44% of the full functionality of CDS in place, which will support certain types of import declaration.”

The report raises concerns that this phased implementation increases the risk that HMRC will not have enough time to deal with any teething problems ahead of Brexit.

It states: “As is common with IT systems, even after testing, issues may also emerge in the live environment.”

Whilst the report acknowledge that HMRC has a contingency plan to run CHIEF alongside the new CDS to ensure trade flows during the transition, it raises concerns that CHIEF does not yet have the capacity to process the sharp rise in customs declarations that Brexit will bring.

The report concludes: “Significant challenges remain and there is a risk that CDS will be unable to fully replace CHIEF by January. HMRC has mitigated some of the risk with its plans to operate CHIEF and CDS in parallel over this period.

"However, it is also critical that HMRC fully tests and scales-up its contingency option over the summer of 2018, supports delivery partners such as community system providers (CSPs) and software providers to make necessary changes to their own systems, communicates effectively with traders about new customs processes and migrates them successfully on to CDS.”