What is a Member's Voluntary Liquidation?
“Our business could be great, but we lack cash flow and have some issues with customers and suppliers. The business is solvent, but we are in a tough situation right now”
A Members Voluntary Arrangement (MVL) Could Work for You
A Company may initiate a Members Voluntary Liquidation when:
- Your business and its shareholders have distributable reserves over £25,000.
- Your tax benefits and savings will massively outweigh fees incurred during Insolvency.
- You want a solution that lasts a few months rather than years.
If you need advice or even urgent help, call us today on 01633530600.
We are happy to provide free initial advice on your current situation, but if you are wondering why a voluntary liquidation is sometimes a better option than informal alternatives, read our outline below.
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Why Choose a Members Voluntary Liquidation?
A members voluntary liquidation is a formal liquidation of a solvent company. If your company has the resources to pay off all its creditors when it closes, then an MVL is an option.
Some valid reasons for choosing an MVL are:
- Your company has no purpose (perhaps services are integrated or outsourced to another business).
- You wish to retire and sell off your company’s assets.
- You want to restructure your company and its assets.
- You have shareholders that want to end their relationships with the company.
Tax Advantages of Members’ Voluntary Liquidation
Low tax rates applied to shareholder distributions is the key benefit of a Members’ Voluntary Liquidation.
First, check if shareholder funds exceed £25,000, if so, then by not entering a Members’ Voluntary Liquidation you will be paying income tax on the shares and not capital gains tax which have a higher tax rate.
In March 2012, the ESC-C16 HMRC concession legislation changed the landscape for shareholders. From that time until the present day, tax benefits are only enjoyed by shareholders if they enter a formal; Members’ Voluntary Liquidation.
Funds are then classed as capital receipts (possibly benefitting from Entrepreneur’s Relief)