Failure by Customs and Excise to manage relations with businesses paying VAT on line has alienated companies across the UK. In August 2002 the department switched suppliers for the digital certificate which authenticates the on line VAT transactions. Customer liaison was carried out by the outgoing supplier, ViaCode, a subsidiary of Royal Mail. Businesses were told about the switch by e-mail, but given no advice about what to they should do. ViaCode withdrew its digital certificate in November 2002 and the Royal Bank of Scotland became the digital certificate provider.Companies that did not take any action found that when they submitted their VAT return they could not gain access to the system. The error messages gave no indication that access was being denied because of an out of date certificate. Those who went on line to submit their return after November 2002 found also that they had missed the deadline for switching to the new supplier.

Callers to the Electronic VAT Return Help Desk found that it no longer functioned and they were told to contact the General Enquiry Line. Advisers on the Enquiry Line were not briefed about electronic returns and they referred callers to a technical team. The technical team advised callers to speak to the Royal Bank of Scotland. Advisors at the Royal Bank of Scotland told callers that they had to complete a new Business Customer Application form to obtain a digital certificate. Not surprisingly, the number of electronic VAT returns submitted in December 2002 went down to 3218 compared to 3484 in September 2002. A spokesperson for Customs and Excise said: “We can see no evidence that this reduction in electronic VAT returns is due to a change of digital certificate supplier.”

Since Electronic VAT Returns were introduced 2 years ago the service has not been marketed, despite the advantages to businesses and the department that comes from less data handling and electronic payment and repayment of VAT. ViaCode withdrew its service because of slow development of the market and limited take up of digital certificates. In contrast, four times as many self-assessment forms were submitted to the Inland Revenue this year bringing the annual total to 320,000. This resulted from an effective marketing campaign.

A former senior civil servant said: “This is an example of how things can go badly wrong when you are in a new ball game. It’s a warning signal for other public services as they develop on line transactions. New electronic services must be marketed and managing customer relations is vital for the success of e-government.”