Acquisition and Board Changes

Tax Systems Plc

("Tax Systems" or the "Company")

Acquisition of OSMO Data Technology Limited

Board Changes

Tax Systems, a leading supplier of corporation tax software and services is pleased to announce that it has acquired the entire issued share capital of OSMO Data Technology Limited ("OSMO") in return for the issue of 4,701,492 new ordinary shares of 1 penny each in the capital of the Company ("Ordinary Shares") (the "Acquisition"), which, at the mid closing price as at 3 April 2017, represents a value of £3.2 million. In addition the Company announces certain board changes.

Highlights

Acquisition

· OSMO is a provider of automated data extraction software that connects to 295 versions of accounting software packages

· Strategic software acquisition enabling organisations to leverage data and automate parts of the end to end tax process which in turn will help them comply with HMRC's Making Tax Digital programme

· Acquisition extends Tax Systems' solutions portfolio to further penetrate the Company's existing customer base of over 1,050 clients

· Using OSMO's technology, finance and tax teams can avoid the requirement for manual data entry from accounting systems leading to increased efficiency and cost savings

· OSMO's technology is sold on a software as a service basis (SaaS); for the year ended 31 December 2016 OSMO generated revenue of £1.2 million, of which over 75% is recurring, and Adjusted EBITDA* of £0.1 million

Board Changes

· Gavin Lyons, formerly Executive Chairman, appointed Chief Executive Officer to focus on the Company's development

· Clive Carver, formerly Non-Executive Director, appointed Non-Executive Chairman

· Kevin Goggin appointed Chief Financial Officer, with Grahame Benson, Finance Director and COO, stepping down with immediate effect

· Paul Gibson appointed Non-Executive Director

* Adjusted for capitalisation of research and development costs in line with Tax Systems' policy

Gavin Lyons, CEO of Tax Systems, commented:

"The acquisition of OSMO and the strengthening of the Board are key steps in the development of the Company.

With regards to the Acquisition, tax departments are under increasing pressure to manage tax risk, leverage tax data and automate as much of the end to end tax reporting and compliance process as possible. OSMO's software is an excellent solution to help ease the manual workload associated with gathering data from accounting systems; this is a critical task which consumes a substantial amount of time and cost. Tax departments will be able to use the OSMO solution to automate data collection, free up expert tax resources and help them prepare for HMRC's 'Making Tax Digital' programme.

In addition, I am excited to accept the role of CEO having been Executive Chairman since the re-admission to AIM in July 2016. I am also very pleased to welcome both Kevin and Paul to the board, both of whom have strong backgrounds in the technology sector, and wish Grahame all the best for his future endeavours.

Further details of the Acquisition and board changes are set out below.

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.

Tax Systems plc

Gavin Lyons, Chief Executive Officer +44 20 3845 3552

MXC Capital Markets LLP (Financial Adviser)

Marc Young/Charlotte Stranner +44 20 7965 8149

finnCap Limited (Nomad and Broker)

Jonny Franklin-Adams/James Thompson +44 20 7220 0500

Further Details on OSMO

OSMO is a UK based business providing software solutions which enable customers to extract accounting data from various off-the-shelf platforms and present the data in a consistent and user friendly format. Using OSMO's technology, finance and tax teams can avoid the requirement for manual inputs and re-keying by automating the collection of data in their accounting systems. This automation of data collection is becoming increasingly important with the advancing digitisation of tax administration, with HMRC currently investing substantially in additional digital administrative methods, under the title 'Making Tax Digital'. The headline goal is to eliminate the annual tax return as it currently exists by 2020, replacing it with a quarterly reporting regime in which companies would report summary totals to HMRC. This could significantly add to the workload of finance and tax teams. Automated data extraction could ease this burden, resulting in increased efficiency and cost savings, making OSMO's products ideal add-ons to the existing software and services that Tax Systems already provides in order to increase spend and penetration per customer. Manual re-keying of data absorbs significant time and cost within Tax Systems' customers as well as increasing the risk of human error and therefore the Board believes that an automated data extraction tool could offer a good return on investment for its customers.

In the year to 31 December 2016, OSMO generated revenue of £1.2 million, of which over 75% is recurring, Adjusted EBITDA* of £0.1 million, and a loss after tax of £0.05 million for the year ended 31 December 2016. Net assets as at 31 December 2016 were £0.2 million. Key customers include Lloyds Bank plc and Close Invoice Finance Limited.

* Adjusted for capitalisation of research and development costs in line with Tax Systems' policy

Terms of the Acquisition

The consideration for the entire issued share capital of OSMO is 4,701,492 Ordinary Shares (the "Consideration Shares") which, at the mid closing price as at 3 April 2017, represents a value of £3.2 million. 85 per cent. of the Consideration Shares are subject to a 12 month lock-in deed whereby the holders have undertaken not to sell, charge or grant any interests over any Consideration Shares held by them and a further 12 month orderly market agreement whereby the holders have undertaken to make any disposal through the Company's brokers. The Consideration Shares represent 6.2 per cent. of the enlarged issued share capital of the Company.

Issue of Equity/ Total Voting Rights

In satisfaction of the consideration for the Acquisition, the Consideration Shares have been allotted to the vendors of OSMO. Application has been made for the Consideration Shares to be admitted to trading on AIM ("Admission"). Admission is expected to occur on 7 April 2017. Following Admission, the total number of Ordinary Shares in issue will be 80,703,381. There are no Ordinary Shares held in treasury and so the total number of voting rights in the Company is 80,703,381.

The above figure of 80,703,381 may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the Company under the FCA's Disclosure and Transparency Rules.

Board Changes

The Company announces that Gavin Lyons has been appointed as Chief Executive Officer with immediate effect. Gavin was previously Executive Chairman of Tax Systems and a partner of MXC Capital Limited ("MXC"), which currently holds 20% of the issued share capital of the Company. Gavin has stepped away from his role as an operating partner at MXC to concentrate his efforts on Tax Systems and Adept4 plc where he remains Executive Chairman. Clive Carver, previously Non-Executive Director, has been appointed Non-Executive Chairman.

The Company also announces that Grahame Benson, Finance Director and COO, has stepped down from the board with immediate effect to pursue other interests. Kevin Goggin has been appointed Chief Financial Officer ("CFO"). Kevin is a chartered accountant by profession with significant international experience in finance and operations, having previously held both CFO and Managing Director positions. Kevin has worked in both listed and private companies, most recently in software and technology and, prior to this, in media storage and logistics. Kevin has completed a number of corporate transactions, including two business sales to private equity. Before joining Tax Systems, Kevin worked with Monitise plc and was CFO at Bonded Services Group.

In addition, Paul Gibson has been appointed to the Board as Non-Executive Director. Paul is a partner at MXC and has had a highly successful career in the TMT sector, most recently as Chief Operating Officer of Advanced Computer Software Plc ("ACS") prior to its acquisition by Vista Equity Partners for £725 million. In his five years at ACS Paul oversaw a period of exceptional value creation and transformation, with responsibility for driving both organic and acquisitive growth. Prior to ACS, Paul held a number of senior roles in both financial and operational capacities, latterly as Finance Director of Redac Limited, the Alchemy backed turnaround that was subsequently sold to ACS for £100 million. The foundations of Paul's career were built at Unigate, GrandMet (now Diageo) and Oracle. Paul will be the sole representative of MXC on the Board.

Schedule Two Paragraph (g) Disclosures

The following information is disclosed pursuant to Rule 17 and Schedule Two Paragraph (g) of the AIM Rules for Companies:

Kevin Paul Goggin, aged 54, does not currently hold any ordinary shares in the Company.

Below is a list of Kevin's current directorships and partnerships and those held in the past five years:

Current Directorships/Partnerships:

Goggin Ltd

Past directorships:

Jigsaw Pieces Limited

Bonded Services Group Limited

Global Logistics Worldwide Limited

Bonded Services Acquisition Ltd

Bonded Services Limited

International Distribution Services Ltd

Novo Overseas Limited

F.T.S. (Great Britain) Limited

Jigsaw Freight Limited

F.T.S. (Road Transport) Limited

Novo Group Limited

Fleet Freight Limited

Filmbond Video Services Limited

FTS Bonded Limited

F.T.S. (Freight Forwarders) Limited

Bonded Services International Limited

Film Media Services Limited

Novo Holdings Limited

Paul David Gibson, aged 52, holds or has held the following directorships or partnerships in the past five years:

Current Directorships/Partnerships:

Enable Business Solutions Limited

Waverton Property LLP

Past directorships:

Advanced Business and Healthcare Solutions Pvt Limited

Advanced Business Software and Solutions Pte Limited

Cedar Group Inc

Transoft Inc

V1 Document Management Inc

Cobaltside Limited

Opsis Limited

Exchequer Software Limited

Teamflow Limited

Care Business Solutions Limited

Consensus Information Technology Limited

Integra Computer Systems Limited

AIM Professional Systems Limited

Formation Software Limited

LFM Partnership Solutions Limited

Advanced Accounts Limited

Pinnacle Computer Systems Limited

Systems Team Limited

AIM Holdings Limited

Computer Software Limited

Springstone Software Services Limited

Transoft Limited

JBS Computer Services Limited

Teamflo Limited

Minerva Computer Systems Limited

Management Support Systems Limited

Caresys Software Limited

Staffplan Enterprise Limited

Open Logistix Systems Limited

Webgenerics Limited

Covemead Limited

Adastra Software Limited

Integrated Support Systems Limited

Cerrus Limited

Open Accounts Limited

Advanced Business Software and Solutions Limited

Advanced Communication Software and Solutions Limited

Konnekt IT Solutions Limited

Exchequer365 Mobile Solutions Limited

Goldcrest Solutions Limited

Compass Computer Consultants Limited

ConsultGRP Limited

ConsultCRM Limited

Lawwwdiary Limited

Plain Healthcare Limited

Laserform International Limited

Videss Limited

Advanced Ticketing Limited

AIM Group Holdings Limited

Advanced 365 Limited

Fabric Technologies Limited

Advanced Business Solutions CRM Limited

ADV Management Services Limited

Business Systems Group Holdings Limited

Staffplan Limited

Advanced Health and Care Limited

Strand Technology Limited

Healthy Software Limited

Belmin Group Limited

V1 Limited

A.S.R. Computers Limited

REDAC Limited

Prolog Systems Limited

Transoft Group Limited

Penfold Heath Media Limited

Meridian Law Limited

Advanced Field Service Solutions Limited

Advanced Enterprise Software Limited

Computer Software Holdings Limited

Computer Software Group Limited

CSG Shareholder Debtco Limited

CSG Midco Limited

CSG Equityco Limited

Advanced Chorus Application Software Limited

Advanced Sharpowl Software Limited

5 Star Computer Systems Limited

Charity Software Limited

G B Systems Limited

Advanced Legal Solutions Limited

Opsis Practice Management Solutions Limited

Applied Computer Expertise Limited

CSG Bidco Limited

Alphalaw Limited

Advanced Computer Software Group Limited

Paul Gibson holds no Ordinary Shares, however, under Tax Systems' Long Term Incentive Plan, Paul is entitled to 2% of the growth in value of the market capitalisation of the Company above the market capitalisation of the Company at the time of its placing and re-admission to trading on AIM in July 2016 ("Re-admission"), as adjusted for future equity issuances and taking into account dividends and returns of capital. This is subject to meeting a share price hurdle rate, which is set as a premium of 40% to the placing price of 67 pence at the time of the Company's Re-admission.

Save as disclosed above there are no additional disclosures to be made in accordance with Rule 17 or Schedule Two paragraph (g) of the AIM rules regarding Kevin Goggin and Paul Gibson.