MVL - Members’ Voluntary Liquidation

If you decide to stop contracting or want to close your limited company and have funds remaining in your business bank account there are a variety of ways to do close it down. The most common way is just to take any remaining profit as a dividend. However, depending upon how much is profit is left you may be able to close it via an MVL which could be more tax efficient.

How to close down a Limited company via the MVL process 

If you have over £25,000 profit left in your company and wish to close it down using capital distribution and Entrepreneurs’ Relief, new legislation means you will need to liquidate the company and enter into Members’ Voluntary Liquidation, to do this you will need to appoint an insolvency practitioner. If you appoint a suitable insolvency practitioner the process is relatively straightforward with your accountant and the insolvency practitioner doing all of the work.

Even for a company with only £25,000 to distribute, the much lower tax rate under Entrepreneurs’ Relief means shareholders on the higher rate income tax band will enjoy a net benefit of at least £2,500 after allowing for the costs of the liquidation, when compared against just taking all the profit as a dividend.  For companies with more cash to distribute the benefits are correspondingly greater.

What is Members’ Voluntary Liquidation?

In a nutshell Members’ Voluntary Liquidation is when a company is to close down and is solvent (has no debt), the funds are distributed as capital via an Insolvency Practitioner to the shareholders which in turn means the shareholders will be liable to pay less tax on the funds.

Typically you would choose the Members’ Voluntary Liquidation process when you cease trading and, having collected in all the money owed to the company, and having paid all the company’s debts, bills and taxes, there remains at least £25,000 cash to be distributed to the shareholders.

What is the MVL process?

The process can vary case to case, depending on what assets your company has. For example is it just money in the bank? Below is a rough idea of the process you’d go through using an MVL.

  • As the director of the Limited company you will need to appoint a liquidator, who must be a licensed insolvency practitioner.
  • The liquidator will file appointment documents at Companies House.
  • The liquidator will publish in The London Gazette (or the Edinburgh Gazette) a statutory notice of his appointment.
  •  A notice of insolvency will be submitted to HMRC.
  • The liquidator will complete post-liquidation VAT return and deregister.
  • The liquidator will write to the bank to close the account and receive company funds.
  • After 1 month the liquidator will distribute funds to the shareholders.
  • A final report will be prepared to the shareholders and a meeting is held.
  • A final corporation tax return will be submitted for the post-liquidation period.

 During all this time they will liaise with your accountant.

SJD Insolvency Services Ltd

SJD Insolvency Services offers an inclusive fixed fee package, which includes every aspect of what is needed to close down your limited company. It aims to make the MVL process as simple as possible, with plain simple English advice along with a hands-off approach for you as the director. All necessary documentation will be prepared by the insolvency practitioner; they will also work closely with your accountant and bank to move the funds from your business bank account to you in the most tax efficient way and as swiftly as possible.

As a client of SJD your accountant will be able to help guide you through an MVL with our in-house insolvency service. However this service is not limited to clients, anyone who is thinking of using an MVL to close down their Limited company can use this service.

For more information on SJD Insolvency Services please call Phillip Beck on 01442 275794 or email, alternatively please complete the form below and Philip will get back to you as soon as possible.

Details of the complaints procedure for SJD Insolvency Services can be found here.

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