A Members Voluntary Liquidation (MVL) is the formal procedure for winding up and liquidating a ‘Solvent’ company. This means that the company has sufficient assets to cover its debts and everyone will be paid in full, with any remaining funds distributed to shareholders. As the company is solvent entering into MVL is voluntary.
Because the process is voluntary and the business is solvent, the process is often relatively straightforward and often costs less than a creditor’s liquidation. When a company is ‘dissolved’ through Companies House it is often a forgotten fact that a creditor could apply to have the company restored within a period of 20yrs from dissolution, however this is not the case if the company is closed through Members Voluntary Liquidation.
However, should the company enter into Members’ Voluntary Liquidation, the £25,000 limit will not apply and distributions will be treated as a capital receipt and have the tax advantage of being subject to capital gains tax rather than income tax.
The costs of an MVL will be paid from the funds at bank and will significantly save you money when compared with the tax savings. We strongly recommend that independent professional tax advice is taken prior to a company entering an MVL for this reason (we can help you with this).
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