A big part of our business is dealing with solvent Members Voluntary Liquidations (MVL). This is the liquidation of a company that has come to the end of its life and has enough money to pay all its liabilities in full. The owner might want to retire or simply move on to other projects, and this is a great way to make sure all the correct boxes have been ticked while extracting any remaining capital in a tax efficient way.
Why might a company want to stop trading?
There are many reasons why a company might cease to trade, such as…
- Completion of a project that the company was specifically created for
- Sale of a company’s business
- Retirement of a company’s owners
- When a self-employed contractor no longer needs their company because they have moved into employment
- The simplification of a group of companies
What are the benefits of an MVL?
An MVL is a tax-efficient way for shareholders to receive the surplus cash/assets from a successful business when they feel the time is right to wind it down. In an MVL, the payment of surplus assets/cash by a liquidator to shareholders is treated as a capital distribution for tax purposes.
Capital distributions are subject to capital gains tax, which can be more tax efficient than other methods of payment. In certain circumstances, shareholders may also qualify for Business Asset Disposal Relief (formerly known as Entrepreneurs’ Relief), which reduces the tax on the capital gain even further, to 10% on qualifying assets up to the first £1m received by shareholders in their lifetime.
Other benefits also include…
- Swift distribution of shareholder funds
- Reducing the risk of any creditors remaining unpaid (An unpaid creditor has a number of years to apply for the company to be restored and can thereafter petition to liquidate the company through the courts, which would result in criticism of the directors)
- Being able to relax, safe in the knowledge that nothing has been missed
How we can help
Our role is to support company directors and their accountants in managing the structured wind-down of trade and to coordinate the formalities of placing the company into MVL.
Before an MVL, the company will have ceased trade, sold or disposed of its physical assets and settled all its debts, generally leaving only a large cash balance. Our job is to ensure that all debts have been paid before returning surplus cash/assets to the company’s shareholders. We also do all we can to expedite this process, so it happens as quickly as possible for shareholders.
All being well, and assuming no creditor claims or HMRC objections are received, shareholders will receive the first distribution of cash assets (less £10,000) within 6-7 weeks. Non-cash assets and the retained £10,000 are then distributed to shareholders just before the conclusion of the liquidation, typically within 9 to 11 months, provided no creditor claims are received in the interim and formal clearance from HMRC* is received. (*Due to backlogs at HMRC, this approval is currently taking longer than the typical 5-7 months)
Book your free consultation now
So, if an MVL sounds relevant to your situation, contact us today for a free consultation. You can arrange a time and a date that works for you and meet with a qualified insolvency practitioner. There’s also no need to travel, as we can run the meeting over Zoom or Microsoft Teams if you prefer. We’ll ask about the background circumstances and current financial position before giving you a no-obligation competitive MVL quote.