Liquidating limited company
MVLs are where shareholders choose to wind down their company, and can only be used if the company is solvent.
Not only do the shareholders benefit from the distributions that exceed £25,000 being treated as capital, the funds may also be subjected to Entrepreneurs' Relief, a personal tax relief that reduces the tax rate down to 10%.
Your insolvency practitioner may be able to act as the liquidator during the sale of the company’s assets.
If your company is under creditor pressure and you’re considering a CVL, it’s worth assessing your other options.
Getting some closure: How to shut down your limited company For contractors that need to close their limited: we look at how to achieve a clean and tidy separation.
Closing your Limited Company with a low tax bill Expert advice on how to extract cash when closing down your company.
If your company is insolvent and under pressure from creditors, it may enter into a creditors’ voluntary liquidation (CVL).However, if you fulfilled your directors’ duties, the risk of accusation is low.Entering into a CVL makes wrongful trading charges less likely than compulsory liquidation.This means that if the distributions are less than £25,000 then 'capital treatment' automatically applies, however if they are in excess of £25,000 they are treated as income in the shareholders' hands.Even following the new rules, assets distributed under a Members Voluntary Liquidation (MVL) are still taxed on the shareholders' as capital, which is why this has now become the most popular method for contractors to close their company.