If you are considering closing your limited company with a voluntary liquidation, there are some important questions that you should ask.
Is your company solvent?
If your limited company is solvent (i.e. it can pay all of its bills) and has assets over about £25,000, then a Members’ Voluntary Liquidation (MVL) is likely to be your best option for closing it.
An MVL (also known as a ‘solvent liquidation’) is a tax-efficient option for directors who want to close their company and get their money out quickly. The typical reasons for closing a solvent company with an MVL are because you are retiring or returning to full-time employment.
By using an MVL the funds to be distributed are subject to Capital Gains Tax, rather than Income Tax. If you qualify for Entrepreneur’s Relief (ER) you can benefit from a 10% marginal rate on distributions. This means there can be considerable tax savings for the director(s) of the company.
An Insolvency Practitioner must be appointed for the MVL process.
Is your company insolvent?
If your limited company is insolvent (i.e. it cannot pay all of its bills) a Creditors’ Voluntary Liquidation (CVL) is often the best way to deal with the situation.
The owners of the company can deal with the company’s debt problems, learn from mistakes that were made and make a fresh start – whilst, crucially, ensuring that all the legal duties to the company’s creditors (i.e. the people / companies you owe money to) are fulfilled.
An Insolvency Practitioner must be appointed for the CVL process.
How do you choose which Insolvency Practitioner to use?
An advantage of a voluntary liquidation is that you can choose which Insolvency Practitioner to appoint to liquidate your company. (It also means that you have some control over the timing of the liquidation.)
In deciding which Insolvency Practitioner to instruct, you should consider things like:
- are the costs of the liquidation affordable?
- is the liquidation process convenient (e.g. can it be done using emails, Skype and a Client Portal)?
- has the Insolvency Practitioner been trading for a long time?
- do they have a lot of experience in voluntary liquidations?
- do they have a friendly, professional team of insolvency experts?
For Clarke Bell, the answer to each of these questions is “yes”.
And, if a voluntary liquidation is not the best option for you and your situation, we will tell you what is.
For more information
For your free advice regarding voluntary liquidations, just contact us on 0161 907 4044 or at [email protected]