A Members’ Voluntary Liquidation (MVL) could be the quickest, easiest way of closing a solvent business. It can allow you to liquidate any assets you have and distribute the cash returns in a tax-efficient way, if…
- You have a cash-rich company that you want to close.
- You want to take advantage of MVL’s tax reliefs.
- You’re confident that your company’s debts can be paid in full.
If this applies to you, and you have retained profits of £25k+, choosing a Members’ Voluntary Liquidation (MVL) could save you money.
What is a Members’ Voluntary Liquidation (MVL)?
A Members’ Voluntary Liquidation is a process for solvent companies. It means directors can close their company smoothly and distribute its remaining assets to shareholders. Unlike liquidations prompted by insolvency, an MVL is initiated voluntarily by directors who can confirm the company’s ability to meet its financial obligations.
As part of the MVL process, all debts must be settled before any distributions to shareholders. The remaining assets can be distributed as capital rather than income, potentially providing tax benefits for shareholders.
The first step is to engage a professional who can assess your company’s suitability for an MVL and explain the process. Talk to our licensed insolvency practitioners to see if a Members’ Voluntary Liquidation is the right option for you.
THE CURRENT ADVANTAGES OF AN MVL
One of the primary reasons directors choose a Members’ Voluntary Liquidation is the tax efficiency it offers. These advantages include:
Capital Gains Tax (CGT)
Under current regulations, distributions to shareholders through an MVL can often be treated as capital rather than income. This allows shareholders to pay Capital Gains Tax, which is often significantly lower than Income Tax rates.
Business Asset Disposal Relief
Most directors qualify for Business Asset Disposal Relief (formerly Entrepreneurs’ Relief), which reduces the CGT rate to 14% on qualifying assets. This can result in substantial tax savings when compared to standard tax rates on dividend income.
Stress-free and compliant process
The Members’ Voluntary Liquidation process is overseen by licensed insolvency practitioners, ensuring that the company’s closure adheres to legal requirements and eliminates the risk of future disputes with creditors or HMRC.
UPCOMING MVL TAX CHANGES IN APRIL 2026
From April 2026, the tax landscape for MVLs is set to change, leading to a reduction in the financial benefits of solvent liquidation. So, what’s changing?
The biggest changes are coming for Business Asset Disposal Relief rates. For disposals made on or after 6 April 2026, gains eligible for Business Asset Disposal Relief will be taxed at 18%.
Contact our team of licensed insolvency practitioners today to discuss your options and determine whether a Members’ Voluntary Liquidation is right for your business. Don’t miss the opportunity to take advantage of the current tax benefits before they change.
IS A Members’ Voluntary Liquidation RIGHT FOR YOU?
In general, if your company has significant retained profits or assets (over £25,000), an MVL is the smarter choice for financial and legal reasons. To proceed with an Members’ Voluntary Liquidation, you must legitimately be able to complete each of these steps:
1. Confirm that your company can pay its debts in full within 12 months of the start of the MVL process. This includes any future and contingent debts.
2. Be able to make a sworn statement confirming the company’s solvency. This statutory declaration of solvency must be made within five weeks of the passing of the winding up resolution.
3. Make a declaration that truthfully states that the directors have made a full enquiry into the company’s affairs and that they’ve formed the opinion that the company will be able to pay its debts in full within 12 months of the commencement of the winding up. (If made fraudulently, the directors may be liable to fines or prosecution.)
Failure to meet these requirements accurately or truthfully can result in legal consequences for all your company’s directors. If you’re positive that this is possible, the current tax advantages represent a significant opportunity to maximise the financial return from their company’s assets.
THE MVL PROCESS
1. Consult a licensed insolvency practitioner: As well as being a legal requirement of an MVL, working with a licensed insolvency practitioner will help you seamlessly navigate the process and avoid potential pitfalls.
2. Prepare a declaration of solvency: All directors must confirm the company’s solvency and ability to pay all debts within 12 months. This declaration is a critical legal document and must be accurate.
3. Pass a resolution to agree to wind up the company: Shareholders must approve the liquidation through a formal resolution. This resolution must be filed with Companies House.
4. Appoint a liquidator: Your insolvency practitioner acts as the liquidator, managing the sale of assets, payment of creditors, and distribution of remaining funds to shareholders.
5. Distribute funds and close the company: After your creditors are fully paid, the liquidator distributes any remaining funds to shareholders as capital. Once the process is complete, we’ll file a final report with Companies House, and the company is officially dissolved.
DON’T DELAY YOUR DECISION
With the April 2026 tax changes approaching fast, now is the time to consider whether a Members’ Voluntary Liquidation aligns with your goals for closing your company. Acting sooner rather than later could help you maximise tax savings and secure a smoother transition.
