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Coconut and GoSimpleTax logo

GoSimpleTax snaps up Coconut to create cloud challenger


Tax tool GoSimpleTax has bought accounting app Coconut to create a bookkeeping and filing solution for individuals and small businesses, as the Making Tax Digital for income tax self assessment delay continues to bite smaller players in the accounting software industry.

24th Apr 2023
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The deal aims to combine Coconut’s bank-feed-driven bookkeeping service with GoSimpleTax’s self assessment and VAT filing product to create a challenger in the UK cloud accounting market targeting the self-employed, sole traders and landlords.

GoSimpleTax is the latest venture from the team behind Keytime, one of the biggest independent practice software providers in the UK until its sale to IRIS in 2015. Founded in 2016 to provide tax filing services for sole traders and landlords, GoSimpleTax has more than 20,000 customers.

“We want to create a challenger to the industry’s established players,” James Cryne, co-founder and director of GoSimpleTax told AccountingWEB. “Our vision is a best-in-class tool for sole traders, landlords and microbusinesses.”

Cryne added that the two products will go into a period of intensive integration to create an end-to-end solution offering bank feed, bookkeeping, self assessment and MTD VAT filing.

“We’re now planning to deliver the ultimate MTD ITSA proposition in 2026,” said Cryne. “Coconut is already HMRC-recognised for quarterly submissions, GoSimpleTax has self assessment pedigree, so we’ll build a comprehensive final declaration offering to go with that. What Coconut can now help us deliver will be head and shoulders above what the two separate firms could have done individually.”

MTD ITSA delay starts to bite

Coconut was initially founded in 2018 as a combined current account and tax tool for freelance subscribers. In 2021 it switched tracks to provide an accounting product for sole traders and landlords regardless of which bank they used, with support for accountants and bookkeepers provided via a partnership account.

Valued at £18m in 2021 as part of a campaign on the crowdfunding platform Crowdcube, Coconut raised a total of £6m from investors. 

However, the new iteration of the product focussed heavily on preparing sole traders and landlords for the Making Tax Digital for income tax self (MTD ITSA) assessment mandation deadline in 2024 – with future growth plans for the tool predicated on the legislation.

Co-founder Adam Goodall told AccountingWEB that the government’s decision in December to push that date to 2026 and raise the threshold for in-scope businesses had forced them to rethink their strategy.

“The MTD ITSA delay affected a lot of companies, including ourselves,” said Goodall. “Since the delay, people are still looking to digitise smaller clients but this will inevitably take longer.”

Coconut co-founders Adam Goodall and Sam O’Connor will both part ways with the new entity following the completion of the deal. 

In a communication to Crowdcube investors today, Coconut stated there would be “no cash consideration up front” from the deal, which instead offers “an equity element to the deal that may produce some future upside to existing investors”.

Speaking to AccountingWEB, both parties added there will be no change in service for Coconut customers and the app’s 400 accountant partners.

Replies (7)

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By Mr J Andrews
24th Apr 2023 12:24

The real strategists would, of course, have anticipated the threshold raising and date extension owing to the obvious impracticalities. Coconut a bit shy on this one.

Thanks (4)
Replying to Mr J Andrews:
By Tornado
24th Apr 2023 13:20

Perhaps they just found this a tough nut to crack and missed their targets.

Thanks (3)
By Hugo Fair
24th Apr 2023 13:36

Coconut stated there would be “no cash consideration up front” from the deal, which instead offers “an equity element to the deal that may produce some future upside to existing investors”.

And in English?
Sounds like there's been some kind of (unannounced) share-swap deal?
But with no cash on the table and no open market in the acquirer's shares, there's no obvious exit route for Coconut investors ... so what do Messrs Goodall and O’Connor get out of this (or is it just an exit from liabilities)?

Thanks (2)
Replying to Hugo Fair:
Richard Sergeant
By Richard Sergeant
24th Apr 2023 15:33

Well, they get the kudos for trying for a start. And that don't pay the bills unfortuneatly but it sounds like (independently from this article) that they will be OK.

It's the entreprenueral spirit, and seeing a challenge and wanting to fix it, and heaven help me a damn good product that fixed some real problems. The fuel needed was MTD ITSA and the delay here, was I think we can all agree, out of their specific hands.

Not every product will make it, but if you're willing to commit to the stress, strains , anxieties and deferment of gratification which is to be a product founder then good on 'em for giving it a go.

Thanks (1)
Replying to rsergeant:
By ireallyshouldknowthisbut
24th Apr 2023 15:52

@Richard, but they are trying to solve a problem which largely does not exist outside of the requirements of MTD.

That is not very smart given your product is hanging on some pretty poor legislation which might at any time be pulled. you are then solving a "must have" rather than a "want", which in turn puts on a "cheap is best" market. Look at Energy Performance certs. No-one gives a stuff about them, its just a "buy the cheapest" product, and the whole thing could be cancelled overnight as its useless.

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Replying to rsergeant:
By Hugo Fair
24th Apr 2023 17:20

I wasn't decrying the general entrepreneurial spirit, Richard, but the extract that I quoted from the article was the communication from the founders to the Crowdcube investors ... and seemed somewhat equivocal in admitting that they've probably lost that investment.

FWIW I've created (and sold) several businesses - but with Mr Micawber as my patron & guide, I only ever gambled with my assets/cash. I know it's seen as very old-fashioned, but I've never been keen on the modern trend to raise money from strangers in order to pay for the betting stake (as Branson, and others, have said frequently the philosophy is to 'get your bets funded')!

Thanks (2)
By ireallyshouldknowthisbut
24th Apr 2023 14:36

So the smart money must be MTDfIT is dead for landlords if this deal is the best outcome.

My view is that there is simply is no business case for the majority of small landlords to use software. Its just too simple.

Just because you *can* write some software doesn't make it useful to the general public.

Thanks (3)