Business Asset Disposal Relief (BADR, formerly Entrepreneurs’ Relief) is a tax-relief scheme, that reduces the amount of Capital Gains Tax you will legally be required to pay on the sale of your company and/or its assets from its standard rate of 20% to a reduced tax rate of 10%.

An MVL is the mechanism which enables shareholders to claim BADR on their distribution of company funds. However, we are not tax advisors and can’t advise on whether you are eligible for BADR or assist with their personal tax return.

What is an MVL?

A Members Voluntary Liquidation is the formal liquidation and closure of a solvent company. It is the most tax-efficient way of closing a solvent limited company, extracting the company’s maximum value through its various tax benefits.

A company is solvent by definition if it has assets sufficient enough to settle all liabilities in full, plus statutory interest within a given period of less than 12 months.

Does applying for an MVL mean I’ll pay less tax?

As a director or shareholder that plans on selling or closing your company, Business Asset Disposal Relief (Entrepreneurs’ Relief) applied for through an MVL can reduce the amount of tax you need to pay. You must be selling all or part of your investment in the company to be eligible for a 10% rate of Capital Gains Tax.

This reduced 10% rate is lower than the traditional Capital Gains Tax rate of 20%, but you should be aware there is a limit on the amount you can claim, which is currently capped at £1m over your lifetime.

How much does an MVL cost?

Our MVLs have a standard fixed fee of £1,995 + VAT + expenses. However, this is only applicable if the company’s sole asset is cash in its bank account, with all liabilities settled. For more complicated cases, there will be a higher fee.

Am I eligible for Entrepreneurs’ Relief?

As with any tax break scheme of this nature, there are specific criteria you will need to fulfil to pay the reduced tax rate. These include:

• You must apply as an individual.
• You should be an employee, officer, or director of the company to which the claim relates.
• You will need to have owned your share in or held office at the company for at least two years before the business ceased trading.
• You will need to own at least 5% of the company and at least 5% of the voting rights.
• You should have at least 5% of the nominal issued share capital.
• You should not have exceeded the lifetime limit of £1 million per shareholder.

You can apply for Business Asset Disposal Relief (Entrepreneurs’ Relief) if you feel you fulfil the above criteria. If your company has gone through an MVL, then you should qualify for Business Asset Disposal Relief in most circumstances.

What should I consider when applying for BADR?

When applying for Business Asset Disposal Relief (Entrepreneurs’ Relief), you should consider the following:

• 12 Month claim period
  Business Asset Disposal Relief (Entrepreneurs’ Relief) will need to be claimed within 12 months after 31st January following the tax year in which the company was closed or sold.
• £1 Million lifetime limit
  An individual can claim for a number of businesses, and they will be included up to the £1m lifetime limit. You will not be entitled to Business Asset Disposal Relief (Entrepreneurs’ Relief) on any and all new businesses after this limit has been reached.
• Spouse claims
  Spouses of claimants of Business Asset Disposal Relief (Entrepreneurs’ Relief) can also put forward their claim providing they own 5% of the company and they have been an employee in some capacity.

How we can help you close your solvent company

If you are looking to close your solvent company in the most tax-efficient manner, whether now or in the future, we can help guide you through through the process of an MVL. We can help you make full use of Business Asset Disposal Relief (Entrepreneurs’ Relief) and walk you through the whole procedure.

• Close and liquidate your solvent company via a Members Voluntary Liquidation (MVL)
  An MVL is the liquidation and closure of a solvent company. The procedure will formally wind up and close your company, whilst extracting the company’s maximum value, through its various tax benefits. The company’s assets, including any premises, are realised, with the remaining funds distributed to shareholders once creditors are satisfied.
  Find out more about Members Voluntary Liquidation

How to get in touch with us: The next steps for engagement

1. Speak with our initial advisers
   Make contact with our team, via phone, filling in a form, or online chat. We will assess your circumstances and, if suitable, arrange a free consultation with a consultant to discuss your company’s situation.
2. Initial assessment
   During the consultation, we will advise if an insolvency procedure is the most appropriate route forward or whether alternative solutions better suit your company’s problems
3. Formally engage with Wilson Field
   If there is an appropriate insolvency solution, we will confirm the necessary steps to start the procedure and will issue you with the relevant documentation for you to formally engage us. 

In summary

Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) will allow you to make tax savings on the capital distributions when closing a company, which eventually go to the shareholders after the company’s closure. You will need to pay Capital Gains Tax on the proceeds from the sale or closure of your business, but a successful claim for Business Asset Disposal Relief (Entrepreneurs’ Relief) reduces the amount of tax owed. As a result, when you use the MVL procedure, you could make significant tax savings.

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