MVL

[MJa]

What are people's opinions on "Distribution in Specie" method of MVL if there is no outstanding Director loan and the company has just cash balance, as opposed to the normal method of transferring the money in estate account by liquidator and then giving it back to the director?

I have heard that HMRC are doing more investigations for "Distribution in Specie" cases - is that true?

[northernladuk]

Chris Maslin part owns MVL Online which a few posters here have used. The vast majority of us have never used it.

Might be worth giving Maslins a bell and asking him if he doesn't post on this thread fairly soon.

[Maslins]

Most of this article is behind a paywall, but you should be able to see enough that Taxation magazine are aware of HMRC challenging the tax treatment of such cases.

Their argument is you took the funds before liquidation, ignore any arguments that you were just borrowing it at that point and the liquidator's paperwork post liquidation, and suggest that therefore it's taxable as a dividend.

Our view is therefore to avoid like the plague. It's more risky for the liquidator so they (including MVL Online) generally won't be keen, and you run the risk that virtually all the tax benefits of liquidating are negated anyway. Therefore my view is just be a bit more patient in waiting for the company's funds.

[MJa]

Most of this article is behind a paywall, but you should be able to see enough that Taxation magazine are aware of HMRC challenging the tax treatment of such cases.

Their argument is you took the funds before liquidation, ignore any arguments that you were just borrowing it at that point and the liquidator's paperwork post liquidation, and suggest that therefore it's taxable as a dividend.

Our view is therefore to avoid like the plague. It's more risky for the liquidator so they (including MVL Online) generally won't be keen, and you run the risk that virtually all the tax benefits of liquidating are negated anyway. Therefore my view is just be a bit more patient in waiting for the company's funds.

thanks for the reply Maslins.
Article says:
HMRC is also understood to be charging an in specie distribution of an overdrawn directors’ loan account as income rather than capital.

If there is no overdrawn Director's loan account before starting the MVL, will the above be applicable?

[Maslins]

thanks for the reply Maslins.
Article says:
HMRC is also understood to be charging an in specie distribution of an overdrawn directors’ loan account as income rather than capital.

If there is no overdrawn Director's loan account before starting the MVL, will the above be applicable?

I have to admit I didn't fully understand your opening post.

If there's no director loan, then what distribution in specie are you talking about? Distribution in specie typically means the liquidator isn't physically transferring cash, but is doing some other kind of transaction with value. From your post I guessed you meant you withdrew the cash in advance.

Can you clarify in a bit more detail the situation you're considering.

[MJa]

I have to admit I didn't fully understand your opening post.

If there's no director loan, then what distribution in specie are you talking about? Distribution in specie typically means the liquidator isn't physically transferring cash, but is doing some other kind of transaction with value. From your post I guessed you meant you withdrew the cash in advance.

Can you clarify in a bit more detail the situation you're considering.

Sorry for the confusion. Below is the scenario:
The company has stopped trading now, final accounts are being prepared by the accountant. There will be no outstanding liabilities, physical assets, an no overdrawn director loan account....just cash at bank.
I am looking at the possible scenarios:

1. Going with the normal MVL route which will take min 8-10 weeks for money to come back to me.
2. Going via distribution in specie route and take out the cash - get all the money out in this financial year itself

Need to understand the drawbacks on both options.

One doubt in my mind is that HMRC can / may change its rules on Enterprenural Relief next year (due to Brexit / General Elections etc.), so shall I rush and get everything sorted this financial year itself, or let the MVL process roll over to next financial year.

[Maslins]

Sorry for the confusion. Below is the scenario:
The company has stopped trading now, final accounts are being prepared by the accountant. There will be no outstanding liabilities, physical assets, an no overdrawn director loan account....just cash at bank.
I am looking at the possible scenarios:

1. Going with the normal MVL route which will take min 8-10 weeks for money to come back to me.
2. Going via distribution in specie route and take out the cash - get all the money out in this financial year itself

Need to understand the drawbacks on both options.

One doubt in my mind is that HMRC can / may change its rules on Enterprenural Relief next year (due to Brexit / General Elections etc.), so shall I rush and get everything sorted this financial year itself, or let the MVL process roll over to next financial year.

1) I'd hope it wouldn't take as long as 8-10 weeks, unless a large chunk of that you're allocating to pre liquidation matters.
2) To my mind this is a director loan situation, unsure why you consider it otherwise? You'll be taking out lots of money, before the liquidation, and trying to argue it's not a dividend. If that's not what you're proposing, then I still don't understand!