If you’re considering closing your successful business then you’ve probably heard about the best way to do it – a Members’ Voluntary Liquidation (MVL).
It’s the quickest and easiest way to release your cash and assets efficiently and let you move onto your next venture while closing the existing business with a minimum of fuss and stress.
There are many other benefits too. In fact we feel a list coming on…
Five key benefits to liquidating with an MVL.
- Tax Efficient – Distributions from an MVL are treated as capital distributions which are taxed at a lower rate than dividends. Business Asset Disposal Relief (BADR) might also be available, further reducing the amount of tax payable.
- Certainty – the formal, structured process means an MVL is the quickest and cleanest way to close a solvent business and distribute assets.
- Fairness – the liquidator always act in the best interests of all members to ensure a fair distribution of assets according to shareholdings
- Freedom – an MVL allows you to move on from running your solvent business potentially in a week or less
- Effort – There are some tasks for directors to complete before entering an MVL (see below) but once these are completed and an insolvency practitioner appointed then their input will be minimal.
It sounds very attractive because it is, but only if the circumstances are right for you and your company. Before you begin any preparatory work you have to ask:
Is my company suitable for an MVL?
If you can answer yes to these conditions then an MVL will be the ideal method to close your business.
- Has the company stopped trading (or is about to)?
- Did it carry out trading activities (such as retail, hospitality, etc)?
- Have you owned your shares in the company for 12 months or more?
- Does the company have over £25,000 of assets to distribute to its shareholders?
If you have answered “no” to any of the above then still get in touch with us because even though an MVL is off the table, there are several other procedures that could be a better fit.
An MVL is the main quest and these are your side missions
If you want to move forward with an MVL then there’s some preliminary business you need to take care of yourself before that can happen.
As well as feeling like a true partner in the process – which you would be – any delay to these would add to the time taken to complete the process and might cause extra work which could lead to higher fees for you.
Your accountant can help you work through the checklist too:
- Confirm the company has ceased or stopped trading
- De-register for VAT and submit a final VAT return which covers the period to the de-registration date
- De-register as an employer and for any PAYE scheme operated for the company as well as submitting a final PAYE return
- Prepare and submit final accounts and a Corporation Tax return covering the date of the cessation of trade
- Make sure any non-cash assets including director’s loans, fixed assets and stock have been received/sold/written-off. This includes collecting any outstanding debts owed to the business
- Confirm all tax liabilities and any other liabilities have been paid up in full
- Close all current company pension schemes and transfer the benefits (Historical payments into a SIPP or similar scheme is OK)
- Any ongoing litigation must have ended – either brought against or by the company
- Have all funds in instant access bank accounts – not with any applicable notice periods
If you have more questions about MVLs even after reading this – including “what is a side mission?” then contact us and we’ll be happy to chat through how it works, how much it costs and how quickly things will move once we start.