Members' Voluntary Liquidation

A Members’ Voluntary Liquidation (“MVL”) is a relatively quick and low cost procedure to close a solvent company in a tax efficient manner.

Typically a MVL will be appropriate when the company has come to the end of its useful life or when the members are considering retirement. MVL’s are also used to restructure a group of companies for tax planning purposes.

The directors of the company must, generally with the assistance of an insolvency practitioner, prepare a sworn Declaration of Solvency stating that the company is solvent and will be able to pay its liabilities (including statutory interest at 8%) within twelve months of the date of liquidation.

Once the Declaration of Solvency is completed the directors will convene a meeting of members to appoint a liquidator of the company. Because all creditors will be paid they have no involvement in the process to appoint the liquidator.

Currently, unless the value of net assets is under £25,000, it will be necessary for a company to enter MVL for the funds to be distributed to members as capital rather than income. Members may be entitled to Entrepreneur’s Relief which provides an effective rate of tax at 10% on distributions.

Advantages of a MVL include:

Significant tax savings may be available to members.
Allows the company to be closed in an orderly manner to the satisfaction of H M Revenue and Customs.
Although the costs are more than would be incurred if the company is simply dissolved, dissolution does not result in the tax benefits associated with a MVL.

Blades Insolvency Services does not provide specialist tax advice and normally we will work in conjunction with your existing accountant or professional advisor.