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Members Voluntary Liquidation MVL IR35 Company Closure

A Members Voluntary Liquidation MVL IR35 Company Closure enables company shareholders of a limited company to formally appoint a licensed insolvency practitioner as liquidator to close a solvent limited company for good. 

As soon as the liquidator has realised all assets of the company and no outstanding liabilities remain. Then, the liquidator makes a capital distribution to company shareholders, either in specie or from funds held in the company.

A solvent company differs from an insolvent company, as there are sufficient assets to repay all creditors in full and distribute to the company’s shareholders. For further reading, please view what is limited liability.

While the company’s directors start a Members Voluntary Liquidation, 75% of shareholders must be given notice of the meeting of members and pass the winding-up resolution.

Obtain prompt, helpful advice on how MVL’s benefit you by calling 0800 612 5448. Liquidate your limited solvent company tax efficiently with HBG Advisory.

View Fixed price MVL

Business Asset Disposal Relief (formerly Entrepreneurs’ Relief 6th June 2020)

Business asset disposal relief has now replaced entrepreneurs relief. You may claim this tax relief when closing a solvent limited company, thereby reducing your capital gains tax liability considerably.

Business Asset Disposal Relief means you’ll pay tax at 10% on all gains on qualifying assets.

Winding up a solvent company in the UK

What the Costs Associated With Members Voluntary Liquidation MVL?

Costs of an MVL are typically subject to issues within the case:

  • Liquidators Fee – Prices start at £950 + VAT. The fee includes
    • Realising company assets, 
    • Reporting filing;
    • HMRC, 
    • Performing the distribution to shareholders and any associated paperwork.
  • MVL Disbursements – Normally:
    • Four separate notices in the Gazette (£60 + VAT each), and 
  • A bond, costing upwards of £80. The bond ensures that funds and assets held by the liquidator are insured and legally required. The cost may vary depending on the value of company assets.

Why might directors consider Members Voluntary Liquidation?

Here are the reasons why a director might place a company into Members Voluntary Liquidation:

  • The company is contemplating to cease trade. An appropriate exit strategy for shareholders, as they can obtain a tax-efficient release of their capital under entrepreneurial relief. The distribution as capital through an MVL may be more tax beneficial than a distribution under income tax.
  • Retirement of company’s directors, shareholders, or an IR35 company, that has no further use.
  • To reorganise a solvent group of limited companies. 

MVL Section 110 scheme of arrangement or restructuring MVL

Usually, company directors opt to use MVLs exit options for limited solvent companies. However, directors can use them to restructure companies in elaborate group structures seeking to demerge or untangle complex structures. – Section 110 of the insolvency act 1986 permits such procedures.

A sale or arrangement following this section is legally binding on members of the transferor limited company.

Who are Members Voluntary Liquidations available too?

MVLs are only available for solvent companies, and directors must make a sworn declaration that their limited company is:

  • Solvent:

And it has or can pay within twelve months of the date of liquidation:

  • Pay all taxes due to HMRC;
  • Settle all outstanding debts due to its creditors;
  • Satisfy all its contractual commitments.

Important:

Creditor claims not declared though require paying after the liquidation, are entitled to receive statutory interest on top of any money owed. Currently, 8% charged starting on the date of the liquidation. 

The distinction between an MVL and a CVL?

The reasons for liquidation?

Solvent limited companies requiring closure wishing to take monies left in the company over £25,000 remain a tax-efficient method liquidating a company. Insolvent companies who want to close voluntary when unable to pay the companies’ debt choose a CVL rather than be involuntarily wound up, then face compulsory liquidation.

The process of Members Voluntary Liquidation MVL IR35 Company Closure?

  • Call a meeting of directors.
  • Sign a Declaration of Solvency.
  • Call a Shareholders Meeting to agree on an MVL.
  • Advertised in the London Gazette;
  • Company then enters an MVL.
  • Sign a Deed of Indemnity to allow early distribution.
  • The liquidator holds the final meeting.
  • Capital distribution upon winding up.

Members Voluntary Liqudation Capital Distribution & ax Benefits?

The member’s voluntary liquidation has several tax benefits. Notably, HMRC still treats shareholder distribution as capital distributions, subject to lower tax.

When considering an MVL, tax relief varies with each circumstance when the distribution is made. HMRC clearance is required. However, taxation benefits exist for company shareholders.

HMRC may use Targeted Anti Avoidance Rules (TAAR) to tackle liquidation shareholder distributions if tax evasion is the primary aim.

What is Entrepreneurs Relief?

In addition, MVL distributions may qualify for Entrepreneurs Relief, a government scheme that allows a reduced Capital Gains Tax of 10% on all qualifying assets.

Entrepreneur’s relief was subject to qualifying criteria. Relief was claimed on £1 m only over your lifetime. However, Business Asset Disposal Relief replaced it in April 2021.

As this is complex, we suggest you contact us to explore the potential tax implications of a member’s voluntary liquidation.

How long does Members Voluntary Liquidation MVL last?

How long does an MVL take? 

Here at HBG Advisory, we pride ourselves on the speed of our MVL’s. We require shareholders to sign a deed of indemnity to ensure the distribution of funds, usually within a week. 

However, should a creditor of the company not be paid for whatever reason? The liquidator can then claim the money from the shareholders to repay money to enable payment.

Members Voluntary Liquidation MVL Alternatives 

Striking off a company (dissolving a company) is a simple way to close a limited solvent company no longer required, and an alternative to an MVL.

The process is relatively simple, provided the company has no objections.

However, not all limited companies suit a strike off.

Suppose your limited company has £25,000 or more available to distribute to shareholders and members. Then, an MVL may be best suited to draw funds from your limited company in a cost-effective manner.

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