What is Members’ Voluntary Liquidation?

A Members’ Voluntary Liquidation (MVL) is a formal process used to close a solvent limited company. This is often the most tax-efficient way to extract company funds when a business is no longer needed, for example, after retirement or when a company restructure takes place.

Why Choose an MVL?

An MVL can be a beneficial option if:

  • Your company has surplus funds exceeding £25,000.
  • You want to benefit from Business Asset Disposal Relief (formerly Entrepreneurs’ Relief), allowing you to pay just 14% Capital Gains Tax on qualifying distributions made before 6 April 2025, and 18% thereafter.
  • Your company has achieved its objectives and is no longer required.

The MVL Process

Board Meeting

Directors agree to place the company into MVL and sign a declaration of solvency confirming the company can pay its debts in full (plus interest) within 12 months.

Shareholder Resolution

Shareholders must pass a special resolution (75% majority) to formally approve the MVL.

Appoint a Licensed Insolvency Practitioner

An IP will manage the process, including distributing funds to shareholders.

Company Closure

Once all debts are settled, and funds are distributed, the company will be formally dissolved at Companies House.

Tax Considerations

While we do not provide tax advice, we can advise on the potential benefits of Business Asset Disposal Relief, which may reduce your Capital Gains Tax rate to 10% on qualifying gains. We strongly recommend you consult with your accountant or tax advisor to explore your individual tax position and maximise any available reliefs.

Key Benefits of an MVL

  • Tax Efficiency: Benefit from favourable Capital Gains Tax rates.
  • Control: Directors maintain control over the process.
  • Quick Distribution of Funds: Subject to clearance from HMRC, funds can often be distributed promptly.

Why Choose DCA Business Recovery?

Our experienced team will guide you through every stage of the MVL process, ensuring all legal and procedural requirements are met. We will advise you based on your company’s circumstances and ensure the MVL is conducted efficiently and effectively.

If you are considering an MVL, contact us today for tailored advice specific to your situation.

Further Guidance

For additional support, explore our FAQs for quick answers to common questions about Members’ Voluntary Liquidation. You can also download our PDF guides for clear, practical guidance on each step of the MVL process. These resources are designed to help you make informed decisions and complete your solvent liquidation with confidence.

Guides

Download PDF guides with clear, practical advice on managing the Members’ Voluntary Liquidation process, including compliance requirements and key steps for an efficient solvent winding-up.

Frequently Asked Questions

The distributions to members in a solvent liquidation are taxed as capital, chargeable to capital gains tax, rather than income. This means that there can be substantial tax savings. Tax advice should be sought when you are considering closing down your business, to make sure that you are eligible for the solvent liquidation process.

The company will have needed to cease trading, with final accounts being filed, and final tax returns being submitted. Tax should be paid in advance on the liquidation date, to prevent interest accruing. Once the company is ready to be placed into liquidation, this could be arranged within a timeframe of 1-2 weeks.

An initial payment can be made to members as soon as the cash at bank is received by the Liquidator. This means that a member could receive their money in a week, however the speed of this process depends on the speed company’s bank dealing with the transfer request.

Non-cash assets can be distributed to members ‘in specie’. This includes any unpaid directors loan account, and also other assets such as unpaid book debts, which can be legally assigned to the members. If a solicitor is instructed to assist with property transfers or deeds of assignment, additional legal fees will apply.

The length of time it takes to complete the liquidation depends on the complexity of the liquidation, and how long it takes to bring the company’s tax affairs up to date. Once all matters are complete, the Liquidator will issue a final account to the members and, with the members consent, a report can be sent to Companies House within a matter of days. The company is automatically dissolved around 3 months after this.

This depends on the complexity of the case – please call us for a quote – 01702 344558.

My accountant referred me to DCA when I was presented with a large PAYE demand from HMRC.

I tried to arrange a payment plan with them and I was unable to do so.

Luke had a meeting with me and my partner and discussed the options available and before we put the company into liquidation.

Anonymous
My accountant referred me to DCA when I was presented with a large PAYE demand from HMRC.

I tried to arrange a payment plan with them and I was unable to do so.

Luke had a meeting with me and my partner and discussed the options available and before we put the company into liquidation.

Anonymous
My accountant referred me to DCA when I was presented with a large PAYE demand from HMRC.

I tried to arrange a payment plan with them and I was unable to do so.

Luke had a meeting with me and my partner and discussed the options available and before we put the company into liquidation.

Anonymous