MVL FAQ
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Do you want to close down your company in a tax efficient manner?
Is your company solvent?
Are you returning to full time employment?
Is your limited company no longer required?
Are you considering or planning retirement?
Do you have more than £25,000 of assets/funds once all debts have been paid?
Then a Members’ Voluntary Liquidation MVL could be the right choice for you!
Closing your company through an MVL process would allow company assets to be transferred to you by way of a capital distribution and thus be potentially eligible for Entrepreneurs’ Relief. This is a generous government allowance where you are taxed at only 10% on the entirety of the funds, potentially saving you £1000s.
Get a Free QuoteThe Entrepreneurs’ Relief allowance is generally only available via an MVL process
You must be a director, partner or employee with more than a 5% shareholding
The business must have been a trading company for the last 24 months
Speak to your accountant for specialist tax advice as they will know your personal financial circumstances
A Board of Directors’ Meeting is held and resolutions are passed to start the MVL procedure.
The Directors swear a Statutory Declaration of Solvency. This is a statement confirming that the company will pay all debts (plus statutory interest and costs) in full within 12 months together with a statement of assets and liabilities.
A Shareholders’ Meeting is held and resolutions are passed appointing the Liquidator and placing the company into Liquidation.
Notice of appointment must be sent to the Registrar of Companies and to creditors within 14 days and 28 days respectively. Creditors are given at least 21 days to claim any amounts owed. The Declaration of Solvency must also be filed at the Registrar of Companies within 15 days.
Notice of appointment must be advertised in the Gazette within 14 days.
After the 21 day period for creditors to submit their claims, the Liquidator will look to agree and pay them. The Liquidator has 2 months to do so, however he will typically undertake this in short order, subject to receipt of any complex claims being received. Statutory interest at 8% pa is also payable.
The Liquidator seeks confirmation from HMRC that there are no outstanding tax matters.
As soon as the liquidation is complete, a proposed final account and report are issued to the shareholders. 8 weeks later, a final copy is sent to the shareholders and to the Registrar of Companies and the Liquidator is released from office. This 8 week period can be shortened, if all members give consent in writing.
The company is dissolved 3 months after.
An interim distribution is made on day one. This will be circa 75-90% of the funds held (less liquidation costs and anticipated creditors’ claims), but the exact amount is dependent on the case.
Once any creditors have been paid in full and the only outstanding matter is receipt of tax clearance, a further distribution of 50% of the company’s assets being held is distributed to shareholders.
Once confirmation has been obtained from HMRC that there are no outstanding matters, the remaining company assets will be distributed to the shareholders.
The company will need to stop trading and sell existing stocks and assets (if the shareholder would like to hold on to any of the assets, these can be distributed to them upon appointment)
Your accounts will need to be completed to the date that the company stopped trading
Any corporation tax liability will need to be calculated by your accountant
You/your accountant will need to complete final PAYE and VAT returns
All creditors should be paid prior to liquidation
The MVL process often takes anywhere between 6 and 12 months. We understand how incredibly frustrating it would be for you to wait for this amount of time before receiving any of your money! This is why an interim distribution between 75 and 90% of the funds held is made to shareholders on day one.
The costs of an MVL are higher than using the strike-off process, because as explained above the MVL process is far more complex and it requires a licensed Insolvency Practitioner to be appointed as Liquidator. However, where there is over £25,000 to distribute to shareholders, these increased costs are usually outweighed by the tax efficient advantages of the MVL process. Please feel free to contact us for more information about our specific fees. We would be more than happy to assist you with the liquidation process.
The proposed changes to the IR35 in April 2021 will impact the private sector. The new legislation will affect contractors (which fall inside IR35) as it will be the responsibility of the employer to determine the contractor’s IR35 status and as a result many organisations may decide that they do not want to risk a fine and could instead give a blanket ban on limited company contractors. In that case contractors may either be offered permanent contracts with their existing employers or the option to be paid through an umbrella company. This will mean that ultimately they will be paid at the same rate of income tax and NIC as a normal employee. As a result, we have seen an increase in the number of companies being placed into MVL, in order to release the funds in a more tax efficient way!
In additional to the potential tax savings of an MVL, a further advantage is that an MVL provides closure with no potential loose ends that could crop up in the future. This could be an unforeseen creditor, a legal dispute or a contingent claim.
Liquidating a business is a huge decision. This is why you will be assigned an account manager, who will hold your hand through the entire process from answering questions to assisting you with the completion of the forms. Contact us today to see just how easy we can make this process for you.
