MVL – Members Voluntary Liquidation
- A liquidation option for solvent companies which have distributable shareholder reserves over £25,000
- Why over £25,000, because under this level will generally attract capital tax treatment without an MVL (always take independent tax advice)
- A Members’ Voluntary Liquidation is often known as an MVL
- An MVL is used regularly by contractors such as IT or Oil and Gas, running through a limited company
- An MVL is a process under insolvency legislation – even though it’s for a solvent company!
- A Licensed Insolvency Practitioner in the UK must act as the liquidator
- An MVL is usually used where the tax benefits and savings far outweigh the Insolvency Practitioner’s fees
- Entrepreneurs’ Relief (a form of personal tax relief on capital gains) may be available to shareholders – tax advice is required
- Entrepreneurs’ Relief can provide significant tax savings
- Members’ Voluntary Liquidation is also often used where Entrepreneurs’ Relief doesn’t apply – this is often a more complex company structure and operation
- Funds can be distributed to shareholders quickly – shareholders can choose their preferred method (subject to tax advice)
- We normally work alongside your existing tax advisor/accountant to provide the MVL service to you
- It’s worth noting that all company taxes are best paid before or on the liquidation date to avoid statutory interest
Some company directors may think that a solvent liquidation is unnecessary; however, this page is dedicated to explaining why a solvent liquidation; Members’ Voluntary Liquidation is an alternative option to the informal alternatives such as the Strike Off route. It should be possible to perform a tax calculation to show whether an MVL is the best option for the shareholders of a company.
How Much does a Members’ Voluntary Liquidation Cost?
- Before we can confirm a price we’ll need to know a few things please?
- We will work on a fixed fee provided nothing unexpected comes up that we weren’t made aware of.
- We’ll need to know what assets (these may be only cash) the company has and their value
- Will any of the assets be distributed in asset form and not cash for example shares, investment bonds etc.
- Are there any creditors (third parties owed money, HMRC for example)
- How many shareholders and directors there are (and are you all taking to each other – not always the case)
- Who is your tax advisor/accountant
- When do you want to liquidate (this helps your accountant in particular to know when to prepare accounts and company tax returns up until)
- Sounds like a lot but hopefully all stuff that’s fairly easy for you!
- You may find that we are not always the cheapest out there; we’ll also be a long way from the most expensive. Consider us a bespoke service offering top level customer care and the ongoing involvement of one of our company directors and owners, who are our insolvency practitioners. It’s your hard earnt money; you’ll decide!
Our Experienced Licensed Practitioners Will Help You To Understand the MVL Process. Get Help Today!
What is a Members Voluntary Liquidation?
Why Would a Company Enter a Members’ Voluntary Liquidation?
A Members’ Voluntary Liquidation is the formal liquidation option for solvent companies. This means that if you own a company that can fully pay off its creditors and leave no outstanding matters when it closes then your company is solvent and this is the correct process for you.
These are some typical reasons why a company would enter a Members’ Voluntary Liquidation:
- Retirement and sale of company assets
- The company no longer has a purpose
- Shareholders want to leave their position and extract their distributions
- Restructuring of company assets
Tax Advantages of Members’ Voluntary Liquidation
When looking to dissolve a solvent company, a first check point is to see the amount of shareholder distributions that need to be made. If these funds exceed £25,000 then by not entering a Members’ Voluntary Liquidation you will be paying income tax on the shares rather than capital gains tax which would apply a lower Capital Gains tax rate.
The first and probably main benefit of a Members’ Voluntary Liquidation is the low tax rates applied to shareholder distributions. To look at this further we need to look back to March 2012.
March 2012 saw the legislation of the ESC-C16 HMRC concession which meant for shareholder funds that exceeded £25,000 they would only receive the tax benefits if they entered a formal liquidation; Members’ Voluntary Liquidation.
The tax advantages of Members’ Voluntary Liquidation include; funds being classed as capital receipts and the funds being potentially subjected to Entrepreneurs’ Relief which is a personal tax relief that will reduce the tax rate down to 10%.
Despite these benefits some company directors are still unsure, however when you compare the amount of money saved via the applied lower tax, it usually far exceeds the cost of the liquidation process itself.
Benefits of Members Voluntary Liquidation
The MVL process itself should be seen as a benefit as it enables the company to fully tie up all paperwork and payments before finally dissolving, leaving no outstanding issues.
It is recommended that all final returns and papers be sent to HMRC before the start of the voluntary liquidation process. This is because the liquidator will need clearance from HMRC before they can file all final paperwork with Companies House. Therefore the sooner the files and forms are submitted the sooner the clearance will be given.
Clearance from the bank is also needed which can hold up the distribution of the assets. One way to avoid this delay will be to transfer the funds over into your liquidators client account, so that the day after entering liquidation the principal distribution can be made.
Why Appoint FA Simms & Partners?
From the moment we are appointed on an MVL our main aim is to achieve the dissolution of the company as quickly and efficiently as possible. Being a solvent company the main goal for shareholders is for them to receive their funds as soon as possible.
Here at FA Simms we typically distribute the bulk of shareholder funds the day after the company has entered liquidation as we transfer the funds into our client account to avoid waiting for clearance from the bank. This is a clear advantage to appointing an FA Simms liquidator compared to our competition.
We offer free advice and no obligation consultations. To find out more call us or fill in our enquiry form. Our qualified team will be able to answer all your questions.
Download MVL Help Sheet
Download: Members’ Voluntary Liquidation Help Sheet
Download Director’s Guide to Members Voluntary Liquidation
Download: Director’s Guide to Members’ Voluntary Liquidation