The National Audit Office said if the UK was to leave the European Union without a deal, then tax non-compliance could rise.
With little time to prepare the border for a no deal scenario the government has prioritised “security and flow of traffic over compliance activity in the short term” the NAO said.
This means “traders and others may not pay all revenue they owe” or comply with other regulatory requirements.
The watchdog’s report, UK Border: preparedness for EU exit, highlighted that much of the physical and digital infrastructure needed for efficient running of the border would not be ready in time.
Specifically, 11 of the 12 critical systems that need to be replaced or changed were at risk of not being delivered on time or to an acceptable standard in the event of no deal.
New infrastructure required to track and inspect goods crossing the border “cannot be built” before March, and, while plans are under way to hire an additional 581 staff, there is a risk that they will not be recruited, pass the necessary security checks and trained in time.
NAO head Amyas Morse said: “Government has openly accepted the border will be sub-optimal if there is no deal with the EU on 29 March 2019.
“It is not clear what sub-optimal means in practice, of how long this will last. But what is clear is that businesses and individuals who are reliant on the border running smoothly will pay the price.”
A no deal scenario would also see the number of HMRC customs declarations processed each year jump from 55 million to 260 million.
Between 145,000 and 250,000 traders may have to make customs declarations for the first time.
The watchdog also warned of organised criminals exploiting gaps in security enforcement.
“Government’s assumption that the risks will not change materially on day one is reasonable in the short term but organised criminals and others are likely to be quick to exploit any perceived weaknesses or gaps in the enforcement regime,” it stated.
This combined with the UK’s potential loss of access to EU law enforcement and national security tools could create security weaknesses which the government would need to address urgently, the NAO claimed.
Responding to the NAO’s findings, Public Accounts Committee chair Meg Hillier said she had already warned on the government’s “complacent approach” to border planning.
“The NAO’s latest work on the UK border shows the slow progress made on preparations. Infrastructure at our borders will not be in place in the event of a no-deal and there is a real danger that systems will not be ready,” she said.
Hillier urged government to work “urgently” with businesses to help them prepare for any outcome.
