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MVL - Closing your Company the tax efficient way.

An MVL is a voluntary liquidation process by a solvent company allowing the shareholders to obtain the value of the business in cash and instead of being charged income tax on the funds a capital gains tax is applied instead, meaning a significant saving on taxes.

Have you recently come out of contract, retiring or perhaps returning to a staff position? Or simply decided to stop contracting and want to close your limited company and have funds remaining in your business bank account.
There are a variety of ways to close down your company. The most common way is just to take any remaining profit as a dividend. However, depending upon how much is profit is left you may be able to close it via a MVL (Members Voluntary Liquidation) which could be more tax efficient potentially saving you thousands of pounds. How does an MVL work in practice?

An MVL needs a licensed insolvency practitioner to be the liquidator. The term “members” means “shareholders” so it is a liquidation driven by the owners of the shares. Usually the proposed liquidator will prepare all the statutory paperwork and meet or discuss the process with the director/shareholders.
Key considerations for a MVL

The important issues for directors to consider for a MVL are:

Getting an accurate up to date balance sheet showing all the assets and liabilities. This is needed for the declaration of solvency.

Having available all the names and addresses for shareholders (the members).

It is advisable to have the company in as simple a form as possible. This means having collected in all the assets and sold them and paying out creditors (suppliers) where possible.

Often the only creditor outstanding at the start of the liquidation is HMRC for corporation tax and/or VAT, which the liquidator will settle once in funds.

An MVL should only be used where all creditors have been paid in full or will be paid in full within 12 months from the date of liquidation.

With tax legislation continually changing it’s important to seek up to date advice about the tax and other implications of a members’ voluntary liquidation. Call us today and discuss if you could benefit from a MVL.