Xerocon 2018: Xero announces shift into income tax, CT and accounts production

Xerocon London
Tom Herbert
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In a Xerocon day one packed with announcements, Xero’s UK MD Gary Turner channelled the spirit of Steve Jobs and left potentially the biggest until last: the company’s move into income tax, corporation tax and accounts production.

The cloud accounting platform will do this via the acquisition of startup and add-on partner Instafile, which Xero announced onstage at its flagship London conference.

As demonstrated on stage later in the morning, Instafile automates the process of tax filing and financial reporting for small UK entities by connecting Xero directly to HMRC and Companies House. Work has already been done ahead of the announcement to integrate the products and means that Xero can now offer its accountant partners bookkeeping, corporation tax, self assessment and statutory filing for small clients.

To win the immediate approval of UK accountants, chief product officer Anna Curzon announced that the Instafiles solution would be available free to Xero’s accounting partners as part of the Xero HQ package. 

“We will solve compliance in the UK,” said Curzon. “We’re going to give you powerful tools that allow you to do your compliance work from right within Xero.”

Speaking to AccountingWEB, Turner said the move “future-proofed” the vendor from government’s upcoming moves to digitise income tax and corporation tax (currently due to roll out in 2020), as well as giving businesses and accountants much-requested functionality.

Making Tax Digital public beta

Xero also used the show to announce that as of today it is in full public beta for Making Tax Digital (MTD), and is encouraging users to sign up.

With the first 20,000 HMRC letters explaining its new digital VAT regime hitting doormats last week, Xero is also stepping up its MTD campaign. In tribute to HMRC’s Hector the Inspector cartoon character, used 20 years ago to remind people to file their self assessment tax returns on time, Turner welcomed Dexter the Digital Tax Advisor as the ‘friendly face’ of MTD.

Xero launched the campaign after research revealed less than half of the UK’s accountants (43 per cent) feel prepared for the change, and a sneak preview can be viewed below:

Bank feeds API

During his keynote Turner also touched on Xero’s new bank feeds API, which paves the way for fintech vendors to provide more value to small business customers.

Turner promoted five leading fintech integrations – Tide, Starling, TransferWise, Revolut and Soldo – that give small businesses in the UK access to more financial information, faster than ever, and at no extra cost from their accounting dashboard.

Xero has also now been granted Account Information Service Provider (AISP) status by the UK Financial Conduct Authority, enabling the company to take advantage of Open Banking in the UK.

 

*This article was amended to clarify that the filing additions mentioned are available for Xero accountant partners, not for small businesses directly*

About Tom Herbert

Tom is editor at AccountingWEB, responsible for all editorial content on the site. If you have any comments or suggestions for us get in touch.

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By NH
14th Nov 2018 16:37

This of course makes good business sense for Xero, and makes life easier for practices that use Xero, however this is terrible news for the quality of data that will now be filed at both Companies House and with HMRC by those business owners who fancy themselves as accountants because they think they know how to do their own book-keeping.
How many of us have seen Directors classing all drawings as salary? Making no tax adjustments for private use? Not accounting for Balance Sheet items correctly? Putting through fuel, repairs and insurance for privately owned cars? Taking "dividends" in excess of profit? The list goes on.
I cannot see how encouraging non qualified individuals to do all this themselves is good for the UK in the long run, especially when HMRC seem incapable of conducting sufficient enquiries.
“We will solve compliance in the UK,” said Curzon. I am at a loss as to how this "solves" compliance, its like saying all you need to do to fix a car engine is hand any old person a spanner, I can tell you if someone handed me a spanner the engine problem would get worse not better!

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to NH
14th Nov 2018 21:33

It’s an accounting partner add on.

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to Mark Telford
15th Nov 2018 11:05

Mark Telford wrote:

It’s an accounting partner add on.

Not for long I bet $$$

Thanks (3)
14th Nov 2018 16:50

I agree with NH, letting non-accountant business owners to produce their own year-end accounts and corporation tax return could get things in a real mess!

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to Mr Hankey
15th Nov 2018 20:42

Clients can register now on government gateway enter any old [***] and file their own returns.

But how many actually do ?

Thanks (3)
By RedFive
14th Nov 2018 17:35

Also agree with NH.

If this was an Accounting Partner only add-on then I would understand the excitement.

To me though it looks like the long term game plan of cutting Accounatnts out of the loop (by HMRC) has just taken a step forward courtesy of Xero.

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to RedFive
14th Nov 2018 21:33

It is just an accounting partner add on

Thanks (2)
14th Nov 2018 18:06

Yes, but GT did say it on a very big and very bright stage.

Thanks (4)
14th Nov 2018 18:30

Bloody hell it gets worse! Why not, instead, convert the payroll module into something decent from its current shambolic form?

Thanks (4)
24th Nov 2018 19:56

Well well well - what a surprise (not)... Xero took over/swallowed Taxfiler a few months ago so it was only a matter of time for this to happen.

"We will solve compliance in the UK,” said Curzon. “We’re going to give you powerful tools that allow you to do your compliance work from right within Xero.”

Oh dear oh dear...

Anyone heard whether those lower mortals such as myself who cant afford Xero (dont like it anyway) will be allowed to carry on with Taxfiler?

PS personally I preferred Hector

EDIT: apologies to Xero Iris took over = lament is still the same.

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to Jennifer Adams
14th Nov 2018 19:15

It was, as as been pointed out, IRIS that bought out Taxfiler. Very annoying, because I think Taxfiler is great and IRIS probably bought it out to slowly kill off some very credible opposition in the small-practice market.
Xero has linked with Instafile.

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By NH
14th Nov 2018 18:51

I thought it was Iris that bought taxfiler?

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14th Nov 2018 20:08

If I were a Xero shareholder - and a lot of the stock is very tightly controlled by a small group of people - I would be asking:

Why is this company which is losing money and bleeding cash blowing a big wad on a load of flashy schmoozing?

Why is my investment going big on new, risky options when some of the modules it released 2 years ago like payroll are still a bit of a car crash?

That's just the start of my questions.

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By RedFive
14th Nov 2018 20:18

Of course all the Xero Accountants on here aren’t defending as they are currently getting smashed at the £300 per head free bar.

I remember being a bank branch manager some 15 years ago and being tasked with ‘selling’ online banking to our customers.

I argued with the head pea brain saying that I wouldn’t be the turkey voting for Christmas but to no avail.

I left soon after and retrained to a profession where I could genuinely help people.

That branch is now closed and I read in despatches the reason sighted being lack of customers.

Just wanted to share that.

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to RedFive
15th Nov 2018 19:52

Fake news Redfive is not £300, as tight Geordies get the early bird pricing.

Oh and I am celebrating so allowed a few cheeky ones

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14th Nov 2018 20:40

Hi all,

Just wanted to clarify that Instafile is a Xero Partner tool and not for small businesses. The goal was to be able to provide accounting partners with a solution to deal with the compliance in the cloud.

Thanks

Glen
Xero

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to Glen Foster
14th Nov 2018 21:56

Many thanks Glen. Will amend the piece to avoid any confusion.

Thanks (2)
14th Nov 2018 21:42

Anyone heard of Instafile then? I bet it's not a patch on Taxfiler. I do hope it's going to get as good as TF quite soon and not be at the quality level of the Xero payroll for years on end.

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15th Nov 2018 09:56

As other has said, it would be more useful if Xero developed proper payroll functionality, and more to the point full VAT functionality to cope with various issues which it currently cant deal with, than flirt with yet more things. Those are two functions with your day to day business clients should be using, but generally do not if they know any better.

Xero should remember tax and year end is infinitely more complex than bookkeeping. if you cant get VAT & PAYE working, what hope for SA?

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to ireallyshouldknowthisbut
15th Nov 2018 11:14

I completely agree with you, sort out the things you currently do before going on another landgrab.
Only this week I have discovered problems with the fixed asset module which are apparently known problems - xeros response is "no we have no idea how long it will take to fix - we'll be in touch"
Thanks guys

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to elliesch
15th Nov 2018 13:54

elliesch wrote:

I completely agree with you, sort out the things you currently do before going on another landgrab.
Only this week I have discovered problems with the fixed asset module which are apparently known problems - xeros response is "no we have no idea how long it will take to fix - we'll be in touch"
Thanks guys

The fixed asset module is absolutely crap! Irecently acquired a big client form a Xero suasage factory, you know the type that wear branded round neck tshirts and let their staff work from home because thats so cool. It was complete autopilot from them, a £3 pack of highlighters had been added as a FA becuase the client has posted it to Office Equipment and the all mighty Xero then added it as a draft FA so the hipster accountant just had to press approve. The depreciation also exceeded the value of the assets at one point. And now its even easier to file a load of unreviewed direct with Companies House and HMRC. Thats from an "accountant" as well! Just wait until they roll it out to the punters! What a laugh that will be.

Complete bad of crap but hey its cool right?

Not sure why my post was edited either, whats the point in having a swear word filter if you cant swear?

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By NH
to MissAccounting
15th Nov 2018 11:34

And now its even easier to file a load of unreviewed [***] direct with Companies House and HMRC. Thats from an "accountant" as well! Just wait until they roll it out to the punters! What a [***] laugh that will be.

Complete bad of crap but hey its cool right?

[/quote]
WOW, I guess the AWeb filter police are watching the news instead!

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to MissAccounting
15th Nov 2018 13:51

@Miss accounting, I had to giggle at that.

We have had similar experiences with "hipster" firms who are very good at marketing, dont understand accounting.

They just slap the data in and what the computer says must be right. Ie stop, when most accountants start their role from client bookkeeping.

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to MissAccounting
15th Nov 2018 14:47

That really sounds poor. I thought the payroll was bad but the FAR sounds even worse. Hmm ... I think we need a thought leader to come on and explain it all.

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to ireallyshouldknowthisbut
16th Nov 2018 10:29

We announced major updates to Payroll and VAT too.

Thanks
Damon
Director, Partner & Product

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15th Nov 2018 11:33

At present it is an Accounting Partner add on, but there is every chance it won’t stay that way for long, and who can blame Xero, QBO are already laying groundwork for similar.

What’s the issue, if you are an accountant who is honest about what your work entails and that actually the filing is the easy bit the complicated bit is getting the disclosures and bookkeeping right in the first place you’ll keep your clients.

I’ve picked up lots of clients recently who generally scratch their head at the fees they are charged when they have done the majority of the work. I’m turning Accounts round in a day and asking for a fee less than half previous. And I should add I’m not taking work off traditional high street accountants, but other one partner practices who have been riding the gravy train for too long.

I picked up books recently where client had provided bank statements in electronic form (CSV and PDF), the Accountant charged £80 to print the PDFs and had clearly ticked each individual transaction as it was entered into Sage/Excel and of course charged for that too. I got client on current year to fill in a category next to each item on bank statement, used an IF formula and had produced a draft set within 2 hours.

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15th Nov 2018 11:44

An end to end cloud solution would be great, preferably from one supplier.

With the acquisition of Hubdoc and now Instafile Xero have a real chance to be the one if they buy someone like Accountancy Manager bring this into Xero Practice Manager and make them all as good as Xero is.

Sage Accountant Cloud V Xero End to End. Place you bets here?

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to North East Accountant
15th Nov 2018 14:08

Apparently HubDoc will even be GDPR-compliant soon. Luckily for them a lot of UK users aren't bothered!

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to North East Accountant
16th Nov 2018 09:30

Can you please leave accountancy manager alone. I used to use workflow max till Xero IT guys who did not seem to grasp day to day needs. They got their hands on it and in my view destroyed it. I lost so many hours have spent time on Workflow then to find it unusable.

Xero payroll is nowhere as good as MYPAYE Ltd for payroll and whilst I think Xero is excellent at some things. My clients go absolutely nuts about how insufficient the purchase ledger is. The purchase ledger is the reason I cannot convert more clients.

I am not knocking Xero in particular as other software all have their issues. I am just not prepared to worship Xero or any of them when they all have a lot of work too.

No competition is not healthy nor is worshipping a company.

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to sarah douglas
16th Nov 2018 11:21

Well said Sarah. Xero purchase ledger is not fantastic & I don't see any evidence that plans are in the offing to change this.

Thanks (1)
15th Nov 2018 11:49

To the last poster, there is a huge difference between Xero and Intuit - the parent of QBO. One that will take you just 5 minutes to confirm when you go to their websites.

But let me spell it out for you:

1. Unless Intuit is run by a monkey it will still be around 5 years from now, and even then a monkey would have to work very hard to get it to a Chapter 11 situation.

2. In my view Xero already is run by monkeys. That's just my opinion. What is not my opinion is that they are losing money and draining cash, that is just a balance sheet fact.

In order to develop their products - and as previous posters have said, even improve some of their offerings to a half-decent standard instead of utter drivel - they must sign up lots of new subscribers.

So, the moment the first of the following 2 things happens:

1. The supply of naive new subscribers dries up.
2. Their bankers and minority shareholders get sick of all the broken financial promises.

Then they are toast. Lights out. Goodnight Vienna.

Evil Knievel a.k.a Simon Cawkwell I hope you are reading this, fill your boots!

Thanks (3)
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to mr. mischief
15th Nov 2018 12:30

There are a lot of very big firms that are using Xero as their default solution so surely they have considered this risk? What are the fallback plans?

You are no doubt right about Intuit, just we don't like QBO, but then again people thought Carillion was OK until it wasn't.

What would be really exciting if someone like Amazon bought Xero out and merged it into one with a new company like say, Amazon Bank.

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to mr. mischief
15th Nov 2018 13:49

Agree with this. I have a personal preference for QBO, but it's the fact that the Group knows how to run profitably that is key. Intuit just announced a subscription price increase, which of course briefly annoyed me, but ultimately I want them to be profitable and stable. Xero have had long enough to 'start up' and need to start delivering profit.

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15th Nov 2018 12:58

I suppose they are trying to cast there net as wide as possible, though it does look like they are prepared to sell it to anyone, based on a shed load of promises.

I would not worry to much about Directors filing their own accounts and calculating their own tax, they may not know but they will be filling nonsense which will end in tears, it will get picket up eventually, possibly by the Vat man.

Unless they have a new Company every 2 - 3 years.

Thanks (1)
15th Nov 2018 14:04

Great idea, however I don't believe it will be any good! Xero is a great small business bookeeping system, best in it's particular sector.

Their payroll is for want of a better word rubbish,their so called project management solution (which was called workflow max and tried to sell it as a practise solution) is rubbish.

I wouldn't worry about clients filing their own accounts and tax returns- good luck with that one!

Typical of Xero, wasting money on development when it's not necessary. Better to work on integrating with other systems.

Anyway I have no confidence they will come up with decent compliance systems that will rival systems already out there.

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15th Nov 2018 15:09

To any Xero shareholders and directors reading this, I have a totally different strategy for you which involves less risk for shareholders and subscribers, and will achieve profit and debt repayment sooner.

1. Ditch the daft expensive ideas for new software.

2. Cut some jobs, deploy the people you have left on fixing the rubbishy stuff like payroll and fixed assets. This will rebuild confidence in people like myself, who knows maybe I will end up recommending Xero!

I think the only thing stopping Xero doing a more sensible strategy like this is the outsized egos of their senior management team.

Parallels with Carillion and GEC Marconi are obvious.

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By Dandan
15th Nov 2018 15:42

Oh dear ! Small businesses encouraged to file their own accounts (quarterly and yearly) and file own tax Returns without using accountants.

I know what HMRC are going to say when the taxpayer complains that collectors and bailiffs are chasing wrong and extortionate amounts of tax. They'll say :" it's your figures !"

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16th Nov 2018 10:36

Dear me what a grumpy bunch.

You need to consider the benefits this can bring to your operation

Instafile is going to be available free via the Xero partner network

Think about that for s moment or 2 if you pay £10 k + to iris or similar for your practice software

Then think of the time cost it will also save

Xeros bank feeds are also a country mile better than anyone else’s . The open banking stuff they are doing will further open that gap.

Time spent sorting problems feeds or feeds drawn in twice is a massive time eroder

These further improvements again present huge time savings for what we do

This end to end stuff will save time in every job and eradicate a big over head for us

It probably early days for it and I suspect the personal tax will take some work but FA and CT return quite good

If you don’t like payroll in Xero don’t use It I use brighttpay it producers a great journal that goes straight into Xero

The MTD vat filing they have shown also looks really good and another time saver

A lot of positives from Xero and great features to be rolled out

I don’t claim to be awesome or cool but been in the game long enough to know when something is best in market for what we do.

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By AVR
15th Nov 2018 20:45

Never seen these so called problem feeds and really can't see how xero's are any better than anybody else's direct feeds.

We do use xero and other software but getting so bored with all the marketing BS that's generated on a daily basis, especially from this site.

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By NH
15th Nov 2018 20:55

Oh I see, so this is exactly the same as QBO already does with taxfiler, great well done Xero

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to NH
15th Nov 2018 21:42

No, as its provided as a free add on for accountants, you will pay for Taxfiler.

I suspect you also just download the TB from Xero into Taxfiler, so would need to do that each time, if you added journals.

For some that could remove the cost of practice software.

I am just a small operator but that still £2000 for me, a cost I would certainly consider saving.

As said multi office firms who spend fortunes on practice software could remove that big overhead, buy I appreciate cost saving won't appeal to all.

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By NH
to Glennzy
16th Nov 2018 06:21

Glennzy wrote:

No, as its provided as a free add on for accountants, you will pay for Taxfiler.

I suspect you also just download the TB from Xero into Taxfiler, so would need to do that each time, if you added journals.

For some that could remove the cost of practice software.

I am just a small operator but that still £2000 for me, a cost I would certainly consider saving.

As said multi office firms who spend fortunes on practice software could remove that big overhead, buy I appreciate cost saving won't appeal to all.


Yes but what about your non Xero clients? And last time I checked my bank statement I was certainly not paying anywhere near 2k for taxfiler!
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to NH
16th Nov 2018 09:28

You can put them through as xero ledger clients.

As a Taxfiler user the benefits will be smaller for you, and your pricing might not stay as low as it currently is under its new owner.

But those who with Iris, Digita etc the cost of their software will be a big number.

I spoke with a guy who had 300 staff so their practice software cost will be eye watering so you could see why it would work to go all in with Xero. The cost saving can be used to invest back into your staff.

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By NH
to Glennzy
16th Nov 2018 09:39

[quote=Glennzy]

You can put them through as xero ledger clients.

Why in the name of hades would I want to do that? I have clients on many different softwares, some of them much better and cheaper than Xero.
I am not bashing Xero but I prefer to keep my options open, Xero is not the answer for all clients

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to NH
16th Nov 2018 12:50

Not sure who this Hades fella is, maybe he was a prolific accountant in 70's.

But as an answer to that I use the ledgers to hoover up jobs that don't need or do bookkeeping regularly. I have a few freelancers and small companies that this works for.
You just scan in the bank statements to AE then cash code them out. Takes minutes to do and you have a full set off accounts with full audit trail without the use of any spreadsheets. You can then do this every 3 months if you wish as a low cost option for MTD for those who will struggle.

Everyone will need to be on something at some point so as a small practitioner I would sooner do 1 thing well than be average at a few things. So supporting one product is easier than supporting many.

The eggs in one basket argument is only a bad choice if you back the wrong horse.

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16th Nov 2018 10:54

Has anyone used instafile?
I would hazard a guess that if they are offering it for free it it will not be very good.
Just because they are offering it doesn’t mean practises will use it
I have never heard of instafile for accounts production and tax filing, so it cannot be a comprehensive bit of software probably very basic.

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to indomitable
21st Nov 2018 21:55

I havent. Hope its got a good disclosure checklist. We pay good money for the one we use and its invaluable.

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17th Nov 2018 14:19

Glenzy,

I think the whole point of my comments in this thread is to suggest very strongly that there is every chance Xero is the wrong horse to back.

This is not the first time by a long chalk that I have raised these issues over the rickety finances of Xero and its dodgy business strategy, which is basically to bet the house on the next big thing and never make any money, in the hope that the banks don't pull the plug.

At no stage in any of these threads has anyone from Xero countered with any points whatsoever along the lines of "No our balance sheet isn't the mess you say it is because of xxx or yyy." No, all you ever get is further posts saying how wonderful the software is, how much better it's going to get, and how soon the whole world will have Xero and then it will be getting sold on Mars.

Well I ain't buying.

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By Tickers
to mr. mischief
19th Nov 2018 12:33

Good points Glenzy, does file their accounts in the Uk or in NZ. If xero does go bank, I expect that somebody with buy the IP behind it.

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to mr. mischief
20th Nov 2018 09:33

"Well I ain't buying" said the Blockbuster CEO when offered Netflix for $50m.

I wonder what he is doing now.

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