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Thread: MVL scenarios

  1. #1

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    Default MVL scenarios

    Hi,

    Just got a couple of things I wanted to raise in regards to some MVL scenarios, and im interested in knowing peoples thoughts on both of them. You'll be able to figure out from these that Im one of life's worriers :-)

    What happens if someone starts the MVL process off now, and the initial, or subsequent distributions only get transferred to the directors personal accounts after the start of the new tax year? Im assuming that each distribution would be taxed on the self assessment year that the distribution was made, rather than when the MVL process started. Now this isn't necessarily a major issue in my mind, but what if on the next Budget date (March 11th), significant changes are made to ER or Capital Gains Tax values? People would then be in a scenario whereby they couldnt be confident of the tax they were going to be accountable for when they started the MVL process. I personally think changes to Capital Gains Tax are unlikely, but I'm not 100% confident that ER will remain intact.

    I've spoken to a number of liquidation specialists so far , MVLOnline having impressed me the most, but it's interesting that there seems to be multiple approaches to the actual liquidation process amongst the companies. From people I've spoken to I've identified at least 3, there may well be more, but im interested in peoples opionions on pro's and cons of each.

    Process 1 - Seems to be the most common.
    • Liquidator requests funds from the Limited Company bank account(can be time consuming)
    • Liquidator makes initial distribution (percentage varies from company to company)
    • Time passes, HMRC make confirmation of the liquidation
    • Liquidator makes final distribution



    Process 2
    • Liquidator requests limited company sends funds to the liquidators holding account (would appear to be quicker)
    • Liquidator makes initial distribution
    • Time passes, HMRC make confirmation of the liquidation
    • Liquidator makes final distribution



    Process 3
    • Liquidator informs Limited Company that they can transfer funds from the limited company directly to the directors personal account, but as a capital distribution
    • HMRC makes confirmation of the liquidation


    Process 3 would appear to be the quickest and on the surface carry the least amount of risk, but why aren't other liquidators following this pattern? Is there a potential downstream issue with this, or do the liquidators carrying out Process 1 or 2 assume there could always be more than 1 director.

    Process 2 would be preferrable to Process 1 as it would reduce the time for the initial distribution, but if the director is making the transfer from the limited company account to the liquidators account, doesn't this then carry a significant risk?

    Anyway, thoughts on the above would be appreciated.

  2. #2

    My post count is Majestic

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    Process is explained here. Check out point 7

    Members Voluntary Liquidation Process | MVL Online

    If you need clarification give them a call.

    Worry less.
    'CUK forum personality of 2011 - Winner - Yes really!!!!

  3. #3

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    You're absolutely right about the worry less part !!

    Yeah, I saw their time frames on their FAQ, the concern was more around accountants being able to get stuff to them in a timely manner, especially with the amount of people rushing for the exit so to speak, and potentially delaying the process due to workload.

    Quote Originally Posted by northernladuk View Post
    Process is explained here. Check out point 7

    Members Voluntary Liquidation Process | MVL Online

    If you need clarification give them a call.

    Worry less.

  4. #4

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    Quote Originally Posted by ahspooner View Post
    What happens if someone starts the MVL process off now, and the initial, or subsequent distributions only get transferred to the directors personal accounts after the start of the new tax year?
    Not sure how this affects if a budget comes in.

    But I do remember Maslins posting that if there are multiple distributions (usually 2) and they are in different tax years then they are taxed separately in each year. This has a benefit of getting the yearly CGT allowance (£12k) twice

  5. #5

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    Your process 2 must involve either:
    a) you voluntarily transferring all your company's funds to a 3rd party that has no legal relationship with you/your company at the time of the transfer, or
    b) you transferring all your company's funds after appointing a liquidator to take over control of your company and all its assets from you as director. Ie you shouldn't be able to do anything at this stage, and physically are only able to do so by exploiting delays in banks becoming aware and limiting your access.
    Plus as you're the one instigating the transfer, don't expect much help from your bank if you make a horrendous typo and inadvertently send the funds to some random unrelated party by mistake...or if the "liquidator" is actually a scammer who you just voluntarily sent all your company's money to. Of course if you take reasonable care and do some due diligence on the firm, neither of these should happen. However, in my opinion you are increasing the risk.

    The normal process involves the liquidator liaising directly with the bank. Yes this can take time, but mainly as the bank will be verifying the liquidator's credentials, verifying the liquidation is valid, before then going through whatever significant internal authorisation process to then transfer your company's entire bank balance. If there's a horrendous muck up there, it would be the fault of either the bank or liquidator, and either the bank's own processes or liquidator's bond would protect your funds.

    Your process 3 is less risky for you. Eg a scammer pretending to be a liquidator would struggle with this. Equally you quite probably regularly make transfers from company to private funds, so less risk of typos entering bank details etc.

    You still have the issue that you're either transferring all funds before liquidation starts (so arguably was it a distribution from the liquidation, or a dividend beforehand), or you're authorising a transfer you're not authorised to make (as it'd be after appointing a liquidator).

    Process 3 also carries the most risk for the liquidator. Eg they're appointed, you extract all the company's funds, then a month in a creditor says the company owes them £10k. The liquidator has zero company funds to settle this. Yes you'll certainly have signed an indemnity giving the liquidator legal right to pursue you to get any excess funds back to pay a creditor, but this can be expensive to enforce if you don't voluntarily play ball...and as the liquidator holds none of your funds, they'd need to use their own funds to pursue it. Not an appealing situation.

    ...so having discussed these kinds of things in depth with my business partner (the licensed insolvency practitioner behind MVL Online), we're only prepared to go with what's effectively your process 1. We fully understand and accept some people are choosing to go with competitors because of that.

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