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Members Voluntary Liquidation

Whilst winding down a limited company is far from the minds of contractors who are just starting out, with luck every contractor will reach the point of retirement or may even at some point re-enter the world of the permanent employment. There have been various mechanisms over the years that have allowed contractors to close their companies as tax-efficiently as possible.

Historically contractors looking to close their company would make a request to HMRC under ESC C16 to treat any final distribution as capital rather than income. However since 1st March 2012, ESC C16 was written into tax law with a distribution limit of £25,000. This means that if the distributions are less than £25,000 then 'capital treatment' automatically applies, however if they are in excess of £25,000 they are treated as income in the shareholders' hands.

Even following the new rules, assets distributed under a Members Voluntary Liquidation (MVL) are still taxed on the shareholders' as capital, which is why this has now become the most popular method for contractors to close their company.

MVLs are where shareholders choose to wind down their company, and can only be used if the company is solvent. Not only do the shareholders benefit from the distributions that exceed £25,000 being treated as capital, the funds may also be subjected to Entrepreneurs' Relief, a personal tax relief that reduces the tax rate down to 10%.

Links and email addresses for Members Voluntary Liquidation specialists in the U.K and overseas.

MVL Guides

Limited company exit expert agrees -- nobody wants to raise a red flag to HMRC.

A guide for contractors on MVL -- the process to wind up a solvent company.

What's optimal today for a liquidating PSC was just as optimal before April 6th.

Your company being in distress doesn’t discharge you from your duties as its director.

Carrying on in business isn't limited to being a limited company.

Put your business exit strategy in place if the end is nigh.

Put your business exit strategy in place if the end is nigh.

Help for a MVL contractor hoping his CGT allowance isn't capped to a single tax year.

Second opinion for a contractor being 'sold' his accountant's £500 service.

Related MVL News and Guides

Getting some closure: How to shut down your limited company
For contractors that need to close their limited: we look at how to achieve a clean and tidy separation.

Closing your Limited Company with a low tax bill
Expert advice on how to extract cash when closing down your company.

How to pay the least tax closing a limited company
Contractors must fork out more to wind-up, so take the following steps to keep a lid on costs.

Contractors' Questions: How to take £100,000 out of a company I’m closing?
Some liquidating contractors will rethink ahead of a big change to company distribution rules.

Contractors, don't be outlaws like the Robin Hood directors
A few not so Merry Men are compensating the Creditors of Nottingham for wrongful trading.

Contractors' Questions: Does the new tax year affect Entrepreneurs’ Relief?
What's optimal today for a liquidating PSC was just as optimal before April 6th.