A Members’ Voluntary Liquidation (MVL) is a director or shareholder led process to close down a solvent* company which allows them to release their cash and assets quickly and efficiently.
It’s a straightforward process and can be concluded in seven days or less.
* companies who can repay their debts within 12 months and will have surplus assets
An MVL is tax efficient
Any distributions to shareholders from an MVL are treated as capital distributions which are taxed at a lower rate than dividends meaning directors/shareholders keep more of their money. Where Business Asset Disposal Relief (formerly known as Entrepreneurs Relief) is available, this will reduce the amount of tax payable to 10%, increasing to 14% as from 6th April 2025 and up to 18% as from April 2026.
An MVL brings certainty
The formal and structured process is the quickest and cleanest way to close a company and distribute assets.
An MVL is fair
The liquidator overseeing the process acts in the best interests of all members to ensure a fair distribution of assets according to shareholdings.
An MVL means freedom
Want to move on from running a business that’s solvent but not required? With an MVL you can be free to move onto the next stage of your professional life in a week or even less.
An MVL is only available under certain conditions. You must be able to answer YES* to all of these to qualify:-
*If you answered no to any of them, get in touch anyway because we can probably still help!
Your accountant will be able to give you expert financial advice on your tax situation and they’ll also confirm that in an MVL any profits distributed to shareholders will be treated as capital gains instead of income.
This means they’ll be taxed at the current Capital Gains Tax (CGT) rates of 18% to 24% instead of the current Income Tax rate of up to 45%. Shareholders may also qualify for Business Asset Disposal Relief (BADR) which reduces the CGT rate to just 10% on gains up to £1 million.
They could also utilise their annual personal CGT allowance (£3,000 in 2024/25) that lets shareholders shield a portion of their capital gains from taxation entirely – effectively making it tax-free!
You’ll need to act quickly because changes announced in the Autumn Budget 2024 means that BADR will increase to 14% on April 1st 2025 and again to 18% on April 1st 2026.
There are two specific conditions set by HMRC to ensure qualification.
The first is that shares in a company must have been held for a minimum of two years before liquidation. The second is that the shareholder holds at least 5% of the voting rights in the company.
If these conditions are met then you’re eligible
EXAMPLE
An asset distribution of £500,000 to a higher-rate taxpayer under current rules (2024/25 would incur a 24% tax rate (£120,000).
If the shareholder qualifies for BADR then that same distribution would incur a rate of 10% (£50,000) – a saving of £70,000.
If this distribution takes place after April 1st 2025 then BADR rises to 14% and the tax due increases to £70,000. From April 2026 it rises again to 18% meaning that the amount due will be £90,000.
Stage 1 – Before you contact us
Several tasks need to be completed before approaching an insolvency practitioner to begin the MVL process.
These are:-
Important – If these criteria aren’t met then they could significantly delay the MVL process and cause extra work which in turn will lead to additional fees.
Stage 2 – Contact Us (same day)
We’ll carry out ID checks, and ask you to provide information demonstrating that your business is ready for closure, and detailing your final cash balance for distribution.
If you’re happy with the process then we’ll send you our terms of business and fee details for your review and approval.
Stage 3 – Finalise your company’s affairs (1 to 14 days)
All the tasks in Stage 1 should have been completed but if any are outstanding, this time is used to settle them before the MVL process will start. If you’ve already completed all necessary steps in Stage 1 and 2, then we move immediately to the next stage.
Stage 4 – Withdrawal of funds and payment of our fee and disbursements (same day)
You will arrange to pay our agreed fee and disbursements from company funds.
You can then withdraw the balance of all company funds and apply their distribution in line with shareholdings before closing the company bank accounts.
These funds will be a loan to shareholders by the company, until we’ve processed distribution notices to clear them by way of a distribution in specie.
Stage 5 – Declaration of solvency (1 to 3 days)
We will forward to you a declaration of solvency, detailing the final company position. You will need to organise having this sworn before a solicitor.
Remember – if it emerges that the company is not solvent, a false declaration is a criminal offence.
Stage 6 – Shareholders and directors meeting (1 to 21 days)
This meeting can be held almost right away depending on the number of shareholders involved – 90% have to be actively engaged in the process. Otherwise 14 to 21 days notice must be given for the meeting depending on the age of the company.
Following the conclusion of this meeting, the company can be placed in liquidation.
Stage 7 – Post liquidation and distribution (3 days to 6 months)
Once the company is in liquidation, for more complicated cases, any remaining assets can be realised and distributed firstly to any remaining creditors then members, otherwise for simpler cases the cash withdrawal/loan from Stage 4 is distributed in specie.
For more complicated cases, members will provide an indemnity, to allow early distributions while creditor claims are finalised.
And finally, remind your accountant to declare any distributions on your personal tax return.
Please contact us for a specific quote tailored to your company and circumstances but here’s an example breaking down what you could expect to pay:
Many directors will have been on the “flat rate” scheme but the additional delays and complications involved in recovering usually less that £250 means we don’t attempt to recover this cost as it will extend the process. If recovering VAT is important or required let us know in advance. We’ll invoice you prior to you de-registering for VAT which will enable you to reclaim the VAT on your final VAT return.
Depending on the company’s net assets the full MVL process will cost between £1,600 and £3,500 but please speak to us to get a bespoke quote based on your company’s circumstances.