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The Tax Implications for Directors in a Members' Voluntary Liquidation. Our Prices Start from £2500 + VAT

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The Tax Implications for Directors in a Members' Voluntary Liquidation

Companies in good financial standing can use a members voluntary liquidation (MVL) to efficiently wind up the affairs of a company and realise its assets into a cash amount that can be divided up amongst shareholders. 

Members Voluntary Tax Advantages

  • During members voluntary liquidation taxation applied to the capital extracted from your company will  fall under capital distributions, which means it will be taxed much lighter than the same funds would be taxed if they were extracted in the form of dividends outside of an MVL procedure.

  • If the company were to sell its assets outside of an MVL and distribute the funds to shareholders then those funds would be taxed as income distributions, which means you would pay higher taxes.

  • Since the funds would be subject to Capital Gains Tax instead of Income Tax they would be eligible for capital reliefs like entrepreneur's relief, which would reduce the taxes owed even further.

Entrepreneur's Relief and Reduced Capital Gains Tax

If entrepreneur's relief is available to your company it would effectively reduce your Capital Gains Tax from 18% to 10% on any gains up to £10 million. This relief is available to individuals who are disposing of the shares of a trading or holding company or group in which they hold 5% or more of the voting rights. If entrepreneur's relief is not available an MVL may still provide tax benefits depending on what tax band the individual is in.

Additional Notes on Members Voluntary Liquidation Tax

George Osbourne's Emergency Budget 2010 raised Capital Gains Taxes, so in some cases there may not be tax advantages associated with members voluntary liquidation.  Whether you'll save on taxes through an MVL will depend on several factors, including whether you're eligible for entrepreneur's relief, the Capital Gains Tax base cost of your company's shares, and the taxpayers marginal tax rate.

If you have any questions about the tax benefits of members voluntary liquidation or any other matter related to business insolvency and recovery, feel free to send us an email about your case for free confidential advice. You can also reach our director's support line on 0800 644 6080. Real Business Rescue provide director advice online, over the phone, or in-person at one of our 72 UK offices or a place of your convenience.

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