A Members Voluntary Liquidation (“MVL”) can be a tax efficient way for the shareholders to distribute the profits of a company as capital.
Under current legislation all capital gains are taxed at 10% (for the distribution of business assets up to £1 million) and a flat 18% for thereafter.
Quite often property developers will use a new limited company for every project primarily because of the ongoing liabilities and risks if something goes wrong with the site. They have been taking advantage of the use of MVL’s to wind these single purpose venture companies up to take the money out in a tax efficient way.
The alternative way of taking the money out is as dividends but this is not very tax efficient at all and may well lead to the shareholders paying up to 40% tax.
We carry out a number of MVL’s each year and are always happy to quote a fixed fee to do these.
The typical use of an MVL is as follows:
§ Tax planning – to pay a lower rate of tax on accumulated profits.
§ Retirement planning – useful for shareholders considering retirement. The business can still be sold and the proceeds distributed via the MVL.
§ Useful for reorganising dormant companies within a group and releasing funds to trading companies and simplifying group running costs.
§ Where the company has come to the end of the project it was formed for.