MVL is a procedure commonly used by directors who wish to retire or move on from their current venture and where there’s nobody else to take on the business. We can advise whether an MVL is right for you based on your aims and intentions and the financial position of the business, providing support and guidance throughout.
What is Members’ Voluntary Liquidation?
Members’ Voluntary Liquidation is a formal insolvency procedure that requires the appointment of a licensed insolvency practitioner (IP). The business is closed down in an orderly manner and proceeds extracted in a cost-effective manner.
Funds extracted through an MVL are classed as capital gains rather than income, meaning they are subject to Capital Gains Tax (CGT) rather than Income Tax; this can represent a serious saving. Furthermore, you may be able to take advantage of Business Asset Disposal Relief which will cut the rate of CGT down to just 10%.
The rate of Business Asset Disposal Relief will increase to 14% in April 2025, and again to 18% in 2026.
How does Members’ Voluntary Liquidation work?
- Directors sign a Declaration of Solvency to confirm the company can repay its debts within 12 months – this includes contingent liabilities, which are debts that may arise in the future
- A licensed insolvency practitioner is appointed to act as liquidator
- A members’ meeting is arranged and if 75% (by value of share) vote in favour, the liquidation process begins
Once shareholders have approved the MVL, the statutory process begins. This includes informing HMRC and Companies House, placing an advertisement in the Gazette, selling company assets, settling claims from creditors, and distributing surplus funds to shareholders.
