Members’ Voluntary Liquidation (MVL)
A MVL, or solvent liquidation, is an effective process set out within insolvency legislation which facilitates the wind down of solvent companies in a structured manner and allows shareholders to extract funds in the most tax efficient way.
Our team here at Keywood Group will work with you and assist to implement the MVL process and our Insolvency Practitioner will ensure that funds are distributed to creditors and shareholders within a relatively short period of time. If you would like further information in respect of the process or require a quote, please contact us.
FAQ’s relating to the MVL process
How quickly can the company be placed into MVL?
The answer to this question will be determined by how many directors and shareholders there are, and if they are all in agreement to place the company into MVL, and whether any complex work is involved. We pride ourselves on being able to assist quickly and can aim to start the MVL process shortly after we are formally instructed. Sometimes the process may take a little longer if there are a number of parties that need to be consulted to obtain the up-to-date position (most notably the company accountant) or if the company has any secured creditors who must be given advanced notification of the process.
Do all liabilities have to be settled before placing the company into MVL?
No, but it is usually preferable for liabilities to be settled in order to avoid paying statutory interest as part of the MVL process. The duty of the liquidator, once appointed, is to realise the assets of the company and settle all liabilities in accordance with insolvency legislation.
How quickly can shareholders expect to receive funds?
At the outset insolvency practitioners will agree the timing and quantum of distributions to the shareholders and work with you in order to meet those expectations. As long as a provision is made to cover outstanding liabilities and the agreed costs of the MVL process, insolvency practitioners aim to distribute the majority of funds to shareholders within 7 days of appointment. We will work with you and the insolvency practitioners to ensure that this is possible. On some occasions, you may prefer the distribution to take place in the following tax year to benefit from further tax allowances. This is fine, and the distributions can be timed to your preference.
Why is the MVL process more tax efficient?
In the normal course of business, funds distributed to shareholders from a company are to be treated as income and taxed as such within your self-assessment tax return. In an MVL, funds distributed are treated as a capital distribution and will be taxed at the applicable capital gains tax rates dictated by HMRC. These rates will always be lower than your income tax rates, however please note this firm cannot provide you with tax advice.
Furthermore, depending upon your personal circumstances, you may be able to apply Business Asset Disposal Relief (formally known as Entrepreneur’s Relief) to the distributions which will mean you are only liable to pay 10% tax. If you would like to discuss this in further detail, please contact us.
How much does the MVL process cost?
At the outset we will provide you with a quote that covers the assistance provided to you in placing the company into MVL and for the liquidator administering the MVL process. The quote will be dependent upon the circumstances of the company but the cost will typically range from £2,000 – £4,000 plus disbursements and VAT for a simple process. Please contact us for a MVL quote.