The government's spending watchdog has warned Britain's planned new customs system might not be ready by the time the UK leaves the European Union.

In 2013, HMRC began setting up a new Customs Declaration Service (CDS) aimed at replacing the current system, which each year oversees the collection of £34bn ($43.9bn) in duties from non-EU countries.

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However, Britain's decision to leave the EU, and consequently its customs union, could delay the implementation of the new regime. The National Audit Office (NAO) warned significant work was needed to complete the new CDS system by the scheduled date of January 2019.

"There is a risk that HMRC will not have the full functionality and scope of CDS in place by March 2019 when the UK plans to leave the EU," the NAO said in the report published on Thursday (13 July).

"In 2015 nearly £700bn of goods crossed the border. The continued smooth operation of these crossings is critical to the UK economy.

"The programme is [...] currently operating with some uncertainty due to the unknown outcome of the UK/EU negotiations, and no changes have yet been made to the scope of the CDS programme following the UK's decision to leave the EU."

In its report, NAO warned any changes needed because of Brexit could lead to further delays and higher costs but HMRC insisted the new CDS would be delivered in time.

"We took the decision to bring in a new declaration system before the EU referendum, but the service remains fully capable of dealing with how the UK's exit from the EU will impact on customs declarations at the border," a spokesman for Britain's tax department said.

In 2015-16, Britain's customs union processed around £55bn worth of imports and exports declarations and HMRC forecast the figure would surge to £255bn once the UK exits the EU.

Businesses said the findings contained in the report were worrying and urged the government to set up a contingency plan.

"It's extremely concerning that the UK's new customs system may not be ready in time for Brexit, potentially resulting in massive delays to trade and leaving thousands of businesses in the lurch," said Mike Cherry, national chairman of the Federation of Small Businesses.

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