Are you a freelancer / contractor who has enjoyed a successful career as an expert in your field using a limited company / Personal Services Company (PSC)?
Have you built up more than £25,000 which is now sitting in the company bank account(s)?
Are you now ready to stop working?
If so, there are some important questions you need to consider…
- What is the most tax-effective way of getting the money out of your company account(s) and into your personal bank account?
- What should you then do with your limited company?
- When will you get your hard-earned money?
Time to retire?
A lot of freelancers / contractors have spent their professional life working through a limited company / Personal Services Company (PSC), rather being full-time employees. This approach suits a lot of people because of the flexibility it affords – for both the contractor and the end client.
However, things have been getting tougher for contractors as they have come under closer scrutiny from HMRC, who feel that many contractors are paying less tax than they should. In many situations, the reality is that any reduced tax they are paying is counter-balanced by their lack of job security and employment rights.
The new IR35 legislation has already come into effect in the public sector, and is likely to be brought into the private sector soon. This is causing many contractors to retire earlier than they had originally planned, to avoid the associated hassle.
The directors of a PSC will have no one to sell their company to – because they are the company. If they are not involved, the company has no real value.
So, what can you do in this situation?
You should discuss your options with your Accountant, as they will know your particular situation and be able to assess the best option for you. (If you don’t have an Accountant, we can find a good one for you.)
The key question for most shareholders of a limited company in this situation is:
How can I close my company, and get my money out as quickly and tax-effectively as possible?
There are a number of options available to you…
- Do nothing with the company, and just draw down money from the company bank account when you need it – bearing in mind the tax implications this would have
- Dissolve the company – this can be cost-effective if you have less than £25,000 of assets in the company. Before going down this route, you should ensure:
- any assets have been distributed prior to the dissolution. (If they haven’t, then once the company has been dissolved they will become ‘bona vacantia’ – i.e. passed to the Crown and deemed as ownerless property)
- there are no creditors who might come forward at a later stage. If they do, and your company is found to be insolvent, directors can be held personally liable for what amounts are owed, as well as being subject to possible fines and prosecution
- Close your company using the Members’ Voluntary Liquidation (MVL) process. Where there are (typically) over £25,000 of company assets, this option will give you considerable tax benefits.
There are tax implications to each of these options. So you should speak to your Accountant before choosing which is best for you…or give us a call (on 0161 907 4044).
When is a Members’ Voluntary Liquidation the best option?
When all your hard work has resulted in your company having over £25,000 worth of assets (typically just cash in the bank), your best option is likely to be a Members’ Voluntary Liquidation (MVL).
You will need a Licensed Insolvency Practitioner to help you with your MVL (also known as a ‘solvent liquidation’). The MVL process enables the company funds to be distributed subject to Capital Gains Tax, rather than Income Tax. And, if you qualify for Entrepreneur’s Relief, you can benefit from a 10% marginal rate on distributions.
MVLs are actively encouraged by HMRC, and the most popular solution for closing down a successful company. This is why the directors of approximately 10,000 successful companies use the MVL process each year to close down their limited company and get the great tax advantages which are legally available to them.
You can also be assured that an MVL causes no issues for your credit rating. The terminology involved does include negative words like ‘liquidation’ and ‘Insolvency Practitioner’, however the MVL process is entirely positive for everyone concerned.
How to get your benefits from an MVL?
Contact Clarke Bell and we will help you through the whole process.
We are the leading provider of MVLs in the UK, and with our low cost MVL service you will get a:
- very affordable fee – just £995 (+VAT +disbursements)
- and, if your company pays our fee, you can claim back the VAT
- speedy distribution of your company assets (after 35 days from the date of the liquidation)
- nationwide service
- award-winning liquidation service
- experienced MVL providers – we have done more than 1,486 MVLs
- trusted professionals – we have distributed over £198,060,920 worth of assets to company shareholders
- secure, easy to use, client portal for all the relevant documentation
- friendly and professional service.
The tax savings you can make from your MVL will more than cover the cost of an MVL with our affordable fees. It really is a great option for closing down a solvent company.
Ready to close down your company?
If you want to close down your successful limited company, then a Member’s Voluntary Liquidation is going to be your best option. This is thanks to the tax benefits available to you, combined with our low cost MVLs.
Clarke Bell are leading providers of MVL across the whole country. We can use all of our experience and expertise to help you.
Contact us on 0161 907 4044 or [email protected] for your (free) advice.
Or, try our “instant MVL quote” to see how affordable an MVL would be for your company.