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 + VAT + expenses – Simple MVL with in specie distribution
  This option is for straightforward companies where there are no other matters to be dealt with as part of the liquidation. The company’s remaining value is held as cash at bank or a director’s loan account balance and can be distributed in specie. An in specie distribution can allow company funds to be distributed on day one of the liquidation, subject to the company meeting the required criteria.
• £1,995 + VAT + expenses – Simple MVL with physical cash distribution
  This option is for straightforward companies where there are no other matters to be dealt with as part of the liquidation. The liquidator will receive the company’s cash into the liquidation and physically distribute it to shareholders. The company funds will be distributed to shareholders in line with their shareholdings once the cash has been received into the liquidation.
• £2,500 + VAT + expenses – MVL with HMRC tax or VAT refund claims
  This option is for otherwise straightforward companies where corporation tax or VAT refunds need to be claimed from HMRC as part of the liquidation. This may be suitable whether the company’s existing funds are distributed in specie or by physical cash distribution.
  This may apply where the company has:
  • The company is due a corporation tax refund
  • The company is due a VAT refund
  • The refund needs to be received into the liquidation and distributed to shareholders

This tier is designed for MVLs where the main additional work is claiming corporation tax or VAT refunds from HMRC.

• Bespoke fee – Complex MVL
  Some MVLs need a bespoke quote because of the nature of the company and its position.
  This may apply where the company has:
  • Property, shares, investments or other assets
  • Assets that need to be sold or realised
  • Section 455 tax refunds
  • HMRC enquiries or investigations
  • Outstanding or disputed creditor claims
  • Active pension schemes
  • More complex shareholder or distribution requirements
  • Solvent restructuring requirements, including Section 110 reorganisations

A bespoke fee will be confirmed once we understand the company’s position and the work required.

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.