Brexit contributes to £440m cut in HMRC efficiency revenues

HMRC’s recent Annual Report and Accounts 2017/18 stated that forecast revenues from its Making Tax Digital (MTD) efficiency project have been reduced by £440m from the original £920m to £480m for the financial year 2020/21.

Much of this is due to the reallocation of resources towards Brexit planning in the past 12 months, including 51 staff moving to ‘European Union exit work’ related customs work following the reprioritisation of projects – primarily from postponed MTD income tax and welfare benefits projects. MTD for VAT is still scheduled to proceed on 1 April 2019, just two days after the Brexit date of 29 March.

HMRC had already received £47m of additional Brexit-funding from the Treasury in 2017/18. It estimates that it could need between £300m and £450m for 2018/19.

According to HMRC's report, Brexit planning is over budget by £250m for 2017/18 across the whole of government. In terms of Brexit tax planning, the major risk over the next twelve months will be the launch of the new customs declaration services (CDS). This is being upgraded to cope with an estimated 250 million declarations compared to the current, pre-Brexit level of 150 million. CDS is scheduled to fully launch in January 2019, just in time for a potential 29 March 2019 hard Brexit. Last month, the Parliamentary Public Accounts Committee confirmed it remains ‘worried’ about whether CDS can be delivered successfully in time.

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