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* 90% For companies with less than £250k cash in the bank. Higher value companies may vary.
An MVL is the formal process to bring a solvent company to a close. A licensed insolvency practitioner is appointed as liquidator and will realise the company’s assets, pay any outstanding creditors and then distribute the remaining surplus funds to the company’s shareholders/members. In an MVL, the company must have paid or be able to pay all of its creditors and contractual liabilities within 12 months of liquidation. Once the liquidator has completed these formalities and received clearance from HMRC, the liquidation will be closed and a few months later the company will be dissolved from the Companies House register. Take some time to read more about the MVL process, or contact us to talk with a dedicated account manager. Please feel free to ask us any questions or check out our FAQ page.
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An MVL can be a more tax efficient route to close down your company as it allows the company assets to be transferred to you by way of a capital distribution and thus be potentially eligible for Entrepreneurs’ Relief. This is a generous government allowance where you are taxed at only 10% on the entirety of the funds, potentially saving you £1000s.
Get a Free QuoteIf your company is solvent and you can settle all liabilities within 12 months, you can place the company into MVL in the following way:
• A Board of Directors’ Meeting is held and resolutions are passed to start the MVL procedure.
• The Directors swear a Statutory Declaration of Solvency. This is a statement confirming that the company will pay all debts (plus statutory interest and costs) in full within 12 months together with a statement of assets and liabilities.
• A Shareholders’ Meeting is held and resolutions are passed appointing the Liquidator and placing the company into Liquidation.
• Notice of appointment must be sent to the Registrar of Companies and to creditors within 14 days and 28 days respectively. Creditors are given at least 21 days to claim any amounts owed. The Declaration of Solvency must also be filed at the Registrar of Companies within 15 days.
• Notice of appointment must be advertised in the Gazette within 14 days.
• After the 21 day period for creditors to submit their claims, the Liquidator will look to agree and pay them. The Liquidator has 2 months to do so, however he will typically undertake this in short order, subject to receipt of any complex claims being received. Statutory interest at 8% pa is also payable.
• The Liquidator seeks confirmation from HMRC that there are no outstanding tax or VAT matters. You can workout any outstanding VAT using our calculator..
• As soon as the liquidation is complete, a proposed final account and report are issued to the shareholders. 8 weeks later, a final copy is sent to the shareholders and to the Registrar of Companies and the Liquidator is released from office. This 8 week period can be shortened, if all members give consent in writing.
• The company is dissolved 3 months after.
When you are returning to full time employment or considering retirement and no longer need your company, the MVL route may be the best option to close your company down!
If the company is solvent and has more than £25,000 of assets/funds it is a more tax efficient way to close down.
When it’s time for closing down your company, a Members’ Voluntary Liquidation is just one option available. Making the right decision can be confusing, so let’s look at the other option available to solvent companies:
One of the more popular options for closing down a company is striking off, also called dissolving the business. The process is straightforward: settle all liabilities in full and dispose of all the company’s assets and remaining funds.
Then, after three months from the date that the company stopped trading (and provided that other statutory criteria are met), apply for dissolution by filing a DS01 form with the Registrar of Companies together with a filing fee of £10. Within seven days of the application, you must notify any interested parties, including shareholders and any remaining or potential creditors, of the application. A notification of the application to dissolve your company will also be published in the Gazette, giving anyone time to come forward with any objections.
If there are no objections, the Registrar of Companies will dissolve your company from their records after two months. Just like with the MVL, you will be able to extract the company’s assets and cash as capital, not income. However, the downside is that you will only be able to receive cash /assets up to £25,000. Any other assets distributed from the company will count (and be taxed) as income and if you leave any assets in the company at dissolution, you will lose title to these to the Crown.
While a strike-off is a simple, cost-effective process, the downfall is that you have a limit on how much cash you can extract from your company as a capital distribution. If you have a larger business with more accumulated capital, dissolving the company may not give you tax-efficient access to all the profits you have worked for over the years.
Even though MVL is a longer process with more costs involved, it can be a more tax efficient route and it may provide you with more cash overall.
What We Can Offer You
We understand that this is a big decision and this is why you will be allocated a dedicated MVL account manager, who will be available to answer any questions you may have in order to make it a smooth process.
You will be hand-held through the whole process, which includes assisting with the preparation of the documentation and being on hand to address any queries.
The process can take up to 6 to 12 months, but the Insolvency Practitioner can distribute up to 90% as soon as the company has been placed into MVL!
If you think that an MVL is the correct route for your company and you are ready to move forward, contact us to learn more about how we can help you liquidate your company in a tax efficient and cost-effective way. We would be happy to talk to you about your options and how to get started.
