Are you considering a Members Voluntary Liquidation?
Monday, 22 February 2021
With all the current uncertainty, you may be considering the future of your company. If so, now could be a good time to consider a Members Voluntary Liquidation (MVL).
An MVL is a formal procedure to wind up a solvent company which allows assets to be returned to its shareholders in a tax efficient way. It’s a voluntary procedure, meaning that it can take place once the directors feel the time is right, whether that be due to the business being sold, the business ceasing to trade or simply because the director has decided to retire.
One of the main benefits of an MVL is that the distributions attract Capital Gains Tax rather than Income Tax, resulting in a lower tax bill. In certain cases, shareholders may also qualify for Business Asset Disposal Relief (formerly Entrepreneurs Relief) meaning that they could benefit from further tax savings by paying only 10% tax on the distribution received.
Other benefits also include the ability to distribute overdrawn director loan accounts ‘in specie’, meaning that the loan doesn’t need to be physically repaid to the company, along with providing comfort that your company has been wound down through a formal process, providing greater protection against potential future claims.
Once the company is ready to be placed into MVL, you’ll need to consult a specialist Insolvency & Recovery team who can prepare the documentation in a short period of time, with interim distributions being made within days of the appointment.
With the Spring Budget due to be delivered on 3 March 2021, there’s plenty of speculation about how the Government’s COVID-19 borrowings will be repaid, either now or in the future. So, this could be a good time, before any potential tax changes come into effect, to consider an MVL.
If you feel you’d benefit from more information, or even if you are curious to understand the benefits of an MVL, please get in touch with our Insolvency & Recovery team who are always happy to have an informal chat.