Members voluntary liquidation (MVL), a solution for solvent companies to efficiently and effectively liquidate the company. During the process of an MVL, shareholders could be entitled to entrepreneurs’ relief.
What is an MVL?
An MVL is a process for liquidating a solvent limited company or limited liability partnership. It provides a tax-efficient means for an individual to divest capital from a business and is often used when a shareholder wishes to retire or walk away from the business. Technically a liquidation by MVL can only be completed if all the companys debts have been covered beforehand or can be settled within a given period of not more than 12 months. Its process is similar to liquidating an insolvent company. Both procedures have to be undertaken by a licensed insolvency practitioner.
How long does an MVL take?
An MVL procedure can take as little as 7 days from receipt of engagement paperwork. However, this can vary as all the assets within the company need to have been realised and all creditors repaid, leaving only the bank balance to distribute. This can be distributed to shareholders within 7 days of receipt of the cash from the bank. The completion of the liquidation process is concluded within 12 months.
What does MVL mean?
MVL stands for Members Voluntary Liquidation and as the name suggests it describes the process whereby the members (or shareholders) choose to liquidate the company in the most tax efficient manner. Companies entering an MVL must be solvent and in a position to repay all outstanding creditors within a specified period insidet 12months.
Why use an MVL?
Using an MVL can legitimately minimise tax liabilities for shareholders wanting to withdraw their investment from a company. This makes it the ideal, tax-efficient way of walking away from a solvent business on retirement and benefitting from Entrepreneurs' Relief, reducing the tax liability to 10% compared with the normal Capital gains tax.
What is Entrepreneur’s’ Relief?
Entrepreneurs’ relief is a concessionary rate of capital gains tax (CGT) available to shareholders who are selling or gifting part or all of their shareholding. They must own at least 5% of voting shares in a qualifying company. Entrepreneurs’ relief is also available to sole traders and partners. The applicable rate is 10% (subject to a lifetime £10m limit)
How much will an MVL cost?
An MVL costs £1,695 + VAT and disbursements. There are two disbursements. The first relates to 4 advertisements in the London Gazette. The second is the cost of a Liquidator’s Bond – a statutory requirement – which is based on a scale depending on the value of assets. We can provide you with an exact fixed quote upon contact.
MVLs can provide you with a fast, low cost, tax-efficient way of closing your company and withdrawing your cash. Our expert advisors will be able to guide you through the process and advise you every step of the way.