Question submission date: December 2021
Full Question: “I am looking to close my company, I’ve been recommended using an MVL – what does this mean and why would this benefit me?”
Very often, contractors with profit over £25,000 will use an insolvency company to close their Limited company. But what is an MVL and why should you choose to use one?
Quite simply, to reduce your tax bill, using one could save you a lot of money!
What does MVL stand for?
MVL stands for Members Voluntary Liquidation and is the process available to solvent companies that will enable them to appoint a liquidator to formally close down their company. It is the most tax-efficient method available to those qualifying.
Do I need to do anything to qualify for an MVL?
Yes, your company must have paid (or be able to pay) all creditors and liabilities within 12 months of liquidation.
The majority of directors (75%) must sign a declaration of solvency and pass a resolution for voluntary winding up. This resolution will be published in ‘The Gazette’ within 14 days and during this period you must inform Companies House of your decision.
How would it benefit me financially?
If you are certain that closing your company is the route that you need to take (see our article, How do I close my Limited Company?) this method means that instead of being charged income tax and capital gains tax, shareholders will obtain the value of the company. In other words, any company assets will be transferred to you via a capital distribution.
What’s the process?
With an MVL you will work with a fully licenced insolvency practice, of your choice, who will realise the company’s assets, pay any outstanding creditors and then distribute any remaining sums to shareholders. While this process is more laborious than a Standard Limited Company Closure, it’s important that you consider it if your profit is over £25,000.
If you are unsure of which route to take when closing your company, talk to your accountant who will be able to advise you of the best course of action, financially, for you.