Cloud accounting software firm Xero is broadening its reach in the small business tax filing space through an acquisition of Instafile.
ZDNet reported this week that Xero, based in New Zealand, will acquire U.K.-based Instafile to integrate its cloud-based tax preparation and filing solution. The company connects accountants, bookkeepers and small businesses to tax authorities to maintain compliance.
Xero will acquire Instafile for $6.82 million paid over three years, with more paid to the tax filing firm subject to its ability to meet certain performance targets. The takeover is expected to be closed next month.
Reports noted that Xero CEO Steve Vamos recently pointed to the U.K. market as a key target for the company. He stepped into the chief executive position after the company's former CEO Rod Drury stepped down earlier this year.
"The headroom for Xero's growth in the U.K. is very exciting, and the initiatives we've announced will enable Xero's accounting and bookkeeping partners to efficiently file tax returns and free up time to focus on providing advisory services to their small business customers," Vamos said.
According to reports, Xero is also now authorized by the U.K. Financial Conduct Authority (FCA) to operate as an account information services provider.
Xero announced its takeover of Instafile at the Xerocon event held in London. At the time, the firm also revealed updates to Hubdoc, which it acquired earlier this year, including new capabilities to automate the aggregation of bills, receipts and other financial documents from a variety of financial institutions and vendors that work with small businesses. Those documents can be fed directly into the Xero accounting platform.
Last week, Xero released its first-half earnings data for the 2019 fiscal year, posting a $19.51 million loss for the period, which the company linked to its partnership with Gusto and the acquisition of Hubdoc. Revenue jumped by 37 percent.