Why contractors may consider an MVL
There are many reasons why a contractor might decide to close down their company using the Members’ Voluntary Liquidation (MVL) process, including:
- retirement
- taking on an employee-role
- emigrating.
The over-riding reason for choosing an MVL is that the directors no longer need their (solvent) company, and they want the most tax-effective way to extract the assets from the company.
There are some significant changes coming up which are likely to influence directors’ decision-making – one being the changes to the IR35 rules…
IR35 and the private sector
When the IR35 changes came into the public sector, there was considerable upheaval in the contractor industry. Many contractors found that they were inside IR35 and they had two options – either become an employee or no longer work within the public sector.
Whichever option they chose, their limited company was no longer required. As a result, we helped a lot of contractors close down their limited company with a Members’ Voluntary Liquidation (MVL).
In the latest Budget it was announced that the IR35 rules will be coming into the private sector from April 2020. As a result, there will be many contractors in the private sector who will be looking to close their limited company after finding themselves inside IR35.
Why go down the MVL route?
A Members’ Voluntary Liquidation (MVL) could be the best option for any contractors looking to close down their solvent company – especially if there is more than £25,000 worth of assets (including cash and Overdrawn Directors Loan Account) in the company.
An MVL is a very tax-efficient way to close down a solvent company because 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 distribution, which means there can be considerable tax savings for the shareholder(s) of the company.
(If the company has debts that it can’t pay, the best option is likely to be a Creditors’ Voluntary Liquidation (CVL) – which we can also help with).
Will you be affected by the IR35 changes?
Some directors have already decided that they can’t be bothered with the hassle of the new IR35 rules, so are already closing down their limited companies with an MVL.
Many others are not sure how the rules will affect them. If that is the case for you, we would recommend that you speak to your Accountant. They will be able to advise you on your particular situation.
Is Entrepreneur’s Relief (ER) changing
We often get asked whether Entrepreneur’s Relief (ER) is going to be abolished or changed – especially when there is an up-coming Budget or a General Election.
Some experts believe that if a Labour government were to come to power, they would abolish ER. Other experts believe that ER is here to stay.
Whatever happens, we are here to help you with our MVL service.
Get your free MVL advice here
If you are considering putting your company into a Members’ Voluntary Liquidation (MVL), contact us now.
Clarke Bell are one of the country’s leading MVL experts.
We have put more than 1,600 companies through the MVL process and distributed over £220 million in cash.
Our MVL service is nationwide, and our standard fee is just £995 +VAT +disbursements.
For more information, contact us now on 0161 907 4044 or [email protected]
Author: Clarke Bell
Clarke Bell Limited
2019-01-11
