A Members’ Voluntary Liquidation (MVL) is a very tax efficient way to close your solvent company.
This typical situation for an MVL is when a company is no longer needed because the directors are retiring or taking up an employee role. At that point, they will be looking for the best way to take the money out of the company and into the shareholders’ accounts.
One of the reasons an MVL can be so beneficial is that the distributed funds will be subjected to Capital Gains Tax, as opposed to income tax. And, if you qualify for Entrepreneurs Relief (as most of our clients do), you can also benefit from a 10% marginal rate on distributions. All of these means that you can make considerable savings.
What are the benefits of an MVL?
Here are just a few of the possible benefits associated with a Members’ Voluntary Liquidation:
- Tax advantages – so more money comes to you
- Low cost way to close your company
- Quick payment
- Unaffected credit rating – as it is a solvent liquidation
- Tax compliant – approved and encouraged by HMRC
What are some of the key things to consider before entering an MVL?
- Make arrangements to sell any stock or assets your company holds. If you’d like to retain ownership of these, you can buy them yourself. Alternatively, they can be sold to a third party.
- You’ll need to deregister for VAT and deregister as an employer.
- Your debtor ledger book much be settled in full. This means that any outstanding debts need to be repaid to the relevant companies before you liquidate. You also must pay any outstanding liabilities to HMRC.
- If a director’s loan is in place and the company owes directors money, this will be classed as an outstanding liability and must be settled. Any money owed to the company must also be paid before the liquidation procedure starts. It may seem like this is a step that can be skipped, particularly if the funds will just be paid back into your own account as part of the MVL distribution process, but this action must be taken nevertheless.
- Ensure that your final tax returns are submitted to HMRC. This must include corporation tax, VAT and PAYE. Even if you’re liquidating your company with many months left until the tax deadline, you still must calculate the figures and submit the return before you begin to liquidate the company.
Before embarking on the MVL process, we’d recommend that you speak to your Accountant to make sure this is the best option for you.
When you want to go ahead with an MVL, you will need to appoint a Licensed Insolvency Practitioner.
Clarke Bell have a wealth of experience in MVLs, and we can help you liquidate your solvent company with our ‘£995 MVL service’.
For more information just get in touch with our friendly and professional team.