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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.

So, what is an MVL? An MVL is 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%.

If MVL is not what you are looking for, why not take a look at SFP's CVL solution here.

Are you thinking of closing your limited company? Not sure if MVL is the right route for you and need some further information from an expert?

You can find trusted Members Voluntary Liquidation specialists and their contact details here on our MVL Service directory.

Get in touch with them today to discuss how you can close your company as tax-efficiently as possible.

 

MVL Guides

Everything contractors need to know about a tax-efficient Members’ Voluntary Liquidation – spelt out by a trusted specialist in the field.

To liquidate your contractor biz, know the options, processes and personnel – if you want to avoid hotspots like disqualification.

SFP are one of the UK’s leading providers of Creditors’ Voluntary Liquidation (CVL) solutions. Their Insolvency Practitioners are fully licensed by the IPA (Insolvency Practitioners Association).

SFP MVL are the number 1 provider of Members Voluntary Liquidation (MVL) solutions in the UK. As part of the award winning SFP Group and the preferred choice for the majority of contractor accountants, you can be assured that if you want to close down your company, your money is in safe hands!

CVL or MVL? That’s the question for director-led liquidations. Either way, ensure your IP is licensed.

Exploring your options and taking the path that will be most beneficial for you is important. 

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Part one of two on the tricky business of weighing up winding-up, and how to do it.

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

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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.

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.

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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?
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