A Members Voluntary Liquidation (MVL) is a closure procedure for solvent companies. It is the most tax-efficient method of closing a company, minimising tax liabilities for shareholders via a reduced rate of Capital Gains Tax (CGT) through Business Asset Disposal Relief (BADR).

The process acts as a solution for solvent companies wishing to liquidate and is a more tax-efficient way to transfer funds among shareholders and directors, typically paying less tax than through dividends or salary.

A company is solvent when it has the capital or assets to settle its debts and statutory interest in full, within a given period of less than 12 months. If you are looking to liquidate your company in a low-cost, tax-efficient manner, speak to us and we can advise you on the best way forward.

Why would you put your company in an MVL?

Directors of a company may choose to enter into an MVL for a number of reasons, including:

• Directors retiring
  The retirement of a director who wishes to transfer funds to a private estate. This is most common in smaller family businesses.
• Tax-efficiency
  Directors and shareholders wish to close the company and take out funds in the most tax-efficient manner.
• Changing circumstances
  A change in circumstances for a key director who no longer wishes to be responsible for the company.
• As part of a reorganisation or merger
  The reorganisation of a group of companies after a merger in order to finalise tax affairs to increase efficiency.

What are the benefits of a tax-efficient MVL?

There are many benefits to an MVL, making it a positive choice for solvent companies wishing to cease trading and liquidate. These include, but are not limited to:

• Tax advantages

  An MVL can avoid the imposition of income tax, which would otherwise arise if your company applied for dissolution, where the total assets exceed £25,000.

  • Capital gains
    The distributions to shareholders from a Members Voluntary Liquidation, enables capital gains tax:
    • For lower rate taxpayers it is 18%
    • For higher rate tax payers it is 24%
  • Business Asset Disposal Relief (BADR)
    In many cases, shareholders benefiting from distributions out of the MVL process will be able claim a further discounted rate of Capital Gains Tax through BADR.
    • If all your gains qualify for BADR this rate is 14%

  Find out more about Business Asset Disposal Relief BADR

  Tax Advice:Wilson Field does not give tax advice. As individuals and companies can have very different tax circumstances, we always recommend that you take advice from your accountant or tax specialist about Business Asset Disposal Relief before making any decisions about closing your company using the MVL process.
• Formal liquidation procedure

  An MVL is a formal liquidation which must be carried out by a licensed insolvency practitioner (IP), such as ourselves. We will ensure that all legal procedures are properly followed, ensuring peace of mind for you as the directors and shareholders.

• Company is formally closed and wound-up

  You can have peace of mind, knowing that your company has gone through a formal liquidation procedure, with the company wound-up and closed.

• Creditors fully paid out

  As your company is solvent, an MVL should ensure that all creditors related to the company are paid out in full.

• Asset distribution

  An MVL ensures a structured process for the distribution of assets meaning a smooth transitions of assets to shareholders, which will help avoid disputes and disagreements.

• Quick cash release

  Subject to shareholders signing their indemnity, here at Wilson Field, we don’t have to wait for HMRC to grant us clearance to release the funds from the MVL process.

• Fast distribution

  We will aim to distribute funds to you within 7 days of receipt of your cash from the company’s bank.

What is our MVL process?

The MVL process must be carried out by a licensed insolvency practitioner (IP) like ourselves. We will carry out the process as follows:

1. Engagement
   If you’re considering closing your company through a solvent liquidation, get in touch with our initial advice team. We can provide free, impartial, confidential advice with no obligation and assess whether an MVL would be suitable for your circumstances. We will then issue an engagement pack.
   
   Although the process relates to solvent companies, it must be managed by a licensed insolvency practitioner.
2. Provision of information
   You will need to provide copies of all company accounts and returns up to the date of liquidation, including the final VAT, PAYE, and Corporation Tax returns, along with evidence of final payments made prior to our appointment.
3. Preparation
   You will need to provide copies of all company accounts and returns up to the date of liquidation, including the final VAT, PAYE, and Corporation Tax returns, along with evidence of final payments made prior to our appointment.
4. Discuss timescales & Declaration of Solvency
   A Declaration of Solvency is a principal requirement for any company wanting to close through an MVL. The declaration states that enquiries have been made into the company’s financial affairs, and the directors are of the opinion that the company can repay its debts plus statutory interest within twelve months. You will need to swear the declaration in the presence of a solicitor. Once this is complete, please return the sworn declaration to us. This document must be made up to a date no more than 5 weeks before the company enters liquidation and must be sworn by all the directors of the company (or by a majority where there are more than 2).
5. Meetings to liquidate the company
   After the declaration of solvency has been sworn, we will provide you with the required meeting paperwork to enable you to formally pass the resolutions to place the company into liquidation and to appoint us as liquidator. The meeting paperwork will be sent to all directors and shareholders.
6. Following appointment
   Once appointed, we will file the Declaration of Solvency and resolutions confirming our appointment as liquidator at Companies House. We will also advertise the appointment in the London Gazette and advertise for creditors to submit claims. While in most cases creditors will have been paid in full prior to liquidation, we are still required to advertise for claims.
7. Write to your bank
   We will request the company’s credit balance from the company bankers and make a distribution within seven working days of the company being placed into liquidation in accordance with the company’s memorandum and articles.
8. Distribute cash
   The time frame of this will depend on when we receive the money from your bank. All banks are different in how quickly they release the funds to liquidators. If your company was VAT registered, we will also reclaim the VAT on our fees and expenses and make a second and final distribution towards the end of the liquidation.
9. Indemnity
   We will also require a written indemnity as part of the engagement to provide the liquidator with sufficient security should any claims arise after the funds have been distributed. As long as all liabilities are settled prior to appointment, then we shouldn’t have cause to rely upon the indemnity.

How much does an MVL cost?

Our cost for a tax-efficient MVL varies depending on your company’s situation at the time of engagement. These costs include two factors: the liquidator fees, covering the work of the appointed insolvency practitioner, and mandatory expenses, which are part of the MVL process.

• £1,995 MVL – Cash at bank/directors loan account
  For straightforward solvent closures. Includes in-specie (“day-1”) distribution of company funds in accordance with the company shareholding. Does not include handling creditor payments or physical distribution of company funds. Shareholders should withdraw the cash prior to liquidation in line with their shareholding.
  Best for: clean balance sheet; no creditors; only cash at bank or director’s loan account; no HMRC refunds.

• £3,995 MVL – Creditor payments included
  Everything in £1,995, plus the credit balance on the company bank account, will be transferred to the client account for the liquidation, and a physical cash distribution will be declared. Also includes payment of creditor claims (incl. statutory interest, where required).
  Best for: routine payment of outstanding company liabilities or for those who would prefer a cash distribution over the in specie process.

• £4,495 MVL – CT/VAT refunds included
  Everything in £3,995, plus we claim and receive Corporation Tax and VAT refunds due to the company.
  Best for: CT/VAT refunds to recover.

• Bespoke MVL – Additional services as required
  Tailored support. Includes everything in £4,495, plus Section 455 refunds, HMRC enquiries/investigations, disputed claims, active pension schemes, title transfers for property/shares/investments in specie, asset realisations, and Section 110 reorganisations.
  Best for: property or shares to distribute; physical asset realisations; HMRC enquiries; disputed claims; active pensions, or a Section 110 split.

Shareholder note: Where there are more than three shareholders to receive a distribution, an additional £100 + VAT per additional shareholder is added to the liquidators’ fee.

All tiers include the option for an in-specie distribution of company funds (a potential “day-1” distribution), subject to a final corporation tax return being provided.

How to get in touch with us: The next steps

If your company is solvent with sufficient assets for an MVL, speak to us. We can provide free, impartial, confidential advice with no obligation, and our licensed insolvency practitioners (IPs) can assess your situation and potentially help you complete a more tax-efficient closure.

1. Speak with our initial advisers
   Make contact with our team via phone, filling in a form or online chat. If we can help, we will arrange a free consultation with one of our consultants to discuss your situation in more depth.
2. Initial assessment
   During the consultation, we will advise if an MVL is the most appropriate route forward for your company, or whether alternative options are available.
3. Formally engage with Wilson Field
   If an MVL is appropriate for your company, we will confirm the necessary steps to place your company into liquidation and will issue you with the relevant documentation for you to formally engage us.

In summary

An MVL is the most tax-efficient option when liquidating your solvent company with more than £25,000 in cash and assets for distribution. It presents many advantages, including a quick turnaround, and requires no income tax to be imposed on the distributed funds. As long as your company is in a position to settle all outstanding liabilities, an MVL will be your best option if you want to close and liquidate your solvent company, whilst extracting the company’s maximum value.

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