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What Are The Five Key Tax Hurdles Of A Members Voluntary Liquidation?

The quick answer

To qualify for a tax efficient Members’ Voluntary Liquidation you must;

  • own over 5% of the shares.
  • have worked in the business as an employee or director.
  • owned the shares for two years.
  • the company traded.
  • it must have traded within the last three years.

 

In more detail

There are a few important tests to make sure the shareholders qualify for Business Asset Disposal Relief (formerly Entrepreneurs’ Relief). The first £1 million of any shareholder gains is taxed at just 10%. So two shareholders will have that allowance each as will a husband and wife.

The rules are:

  1. You own at least 5% of the ordinary voting shares.
  2. You were an employee or director (do not leave before the share sale).
  3. You must have  owned the shares for 24 months.
  4. The company actually carried on a trade. An example of a non trade is a company that owns and lets property.
  5. Finally, the company must be wound up within 36 months of the date trading ended.

Once the shareholders are at that stage they should find an experienced and qualified Licensed Insolvency Practitioner like us and obtain a fixed fee quote to wind up the business as a Members’ Voluntary Liquidation.

From the date of the first enquiry usually it takes about 7 days to place the company into liquidation (if the shareholders are ready to proceed) and then another 7 days to pay out the majority of the funds. There is then a period of usually 3 to 6 months before the company can be finally dissolved.

Contact Us Today

If you would like to find out more about MVL’s or ask for a free quote please  speak to our team today, we’re local.

tip

If you need insolvency advice the earlier you talk to someone like us the better as you will have more options. We can help, contact us today.

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Author: David Kirk - ACA FABRP
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Just a quick email to say a heartfelt thank you for your very calm, considered, expert advice regarding my circumstances on Tuesday. Things looked bleak before you explained my options much more clearly, in simple layman’s terms.
Rob Elliott (14th December 2021)

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David Kirk

Licensed Insolvency Practitioner