How the Autumn Budget 2024 Impacts Members Voluntary Liquidations (MVLs)

On 30th October 2024, the new Chancellor of the Exchequer, Rachel Reeves, unveiled the highly anticipated Autumn Budget. This included increases in Capital Gains Tax (CGT) and Business Asset Disposal Relief (BADR) rates.

If you’re a director of a solvent company considering a solvent Members Voluntary Liquidation (MVL), these changes might affect your tax position. Depending on your circumstances, it may be beneficial to consider placing your company into an MVL sooner to benefit from the lower BADR rates.

What is an MVL?

An MVL is a liquidation process that enables shareholders to extract the assets from the company in a tax-efficient manner. It is only suitable for companies which have more assets than liabilities and are, therefore, solvent. The process closes the company and allows you to walk away.

If your company has more than £25,000 in assets, including cash at the bank, you may be eligible for BADR. This reduces the amount of CGT the company will pay on the sale of the company and/or its assets.

Changes to Business Asset Disposal Relief and Capital Gains Tax

Ever since the general election, there has been speculation about potential tax increases. With the Government previously ruling out VAT and income tax rises, CGT and BADR rates seemed likely to go up. This speculation is now confirmed, and the changes announced in the Autumn Budget are as follows:

• CGT increases
  CGT increased from 30th October 2024.
  • Lower taxpayers’ rate will rise from 10% to 18%
  • Higher taxpayers’ rate will rise from 20% to 24%
• BADR increases
  BADR rates will remain the same for the rest of the financial year.
  • From April 2025, the rate will increase from 10% to 14%
  • From 2026, the rate will increase again to 18%

How can I avoid the impact of these changes?

While CGT has already increased, you can still avoid the increasing BADR rates, which could lead to a higher tax bill for the shareholders at the end of an MVL. By speaking to us and starting the MVL process now, you can benefit from the current, lower BADR rate before it increases.

How much does an MVL cost?

The costs of an MVL can vary depending on the complexity of the company’s circumstances, including the volume of its assets and whether it owes anything to HMRC.

Our current prices for an MVL are as follows:

• £995 MVL – Cash at bank/director’s 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 can we place your company into an MVL

Depending on your circumstances, you may want to place your company into an MVL before the changes affect the amount of BADR you might be entitled to. Equally, you may be planning to liquidate your company in the future and want more information as to how these changes will affect you.

Whatever your situation, speak to us if you want advice around entering an MVL. We can set out what information would be required and discuss the timescales and process with you.

1. Speak with our initial advisers
   Contact our team via phone, filling in a form, or via our 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.

Summary

At the end of October 2024, the Chancellor’s newly unveiled Autumn Budget announced rises to rates of CGT and BADR. The rate of CGT has already changed, and BADR rates will increase from April 2025. These rises will impact the benefits gained from putting a solvent limited company into a tax-efficient MVL.

If you’re looking to liquidate your solvent limited company before BADR rates increase, or you want more information if you plan to liquidate your company in the future, speak to us. We can discuss timescales and outline what information we’ll need to begin the process.