We’re anticipating a general election in the next year or so, and with a change of government often comes a change in policy. One such area is tax clearance. Members’ Voluntary Liquidations (MVLs) are a tax-efficient way for shareholders to be repaid their capital during the closure of a solvent company. After years of backlog and delays, HMRC recently announced a change of process, which will potentially make it quicker and simpler for business owners considering liquidation. Another area is tax with the risk that any new government may seek to make changes to rates and reliefs. Here’s everything you need to know about MVLs.
What exactly is a MVL?
A MVL only applies to the liquidation of a solvent company. Whilst it’s the directors who initiate the process, it is the shareholders who then appoint an insolvency practitioner. As the company is solvent, all debts must be settled and then any cash and other assets remaining can be distributed amongst the shareholders.
What’s changed?
Previously Insolvency Practitioners would have required tax clearances from the HMRC before being able to conclude the liquidation. The clearances would be official verification that the company’s tax affairs were up to date and complete. With the issuing of clearances subject to HMRC backlogs and delays, MVLs were taking anything up to 24 months to complete.
Effective immediately, as of the 6 of December 2023, HMRC released new guidance announcing that they “will no longer provide pre and/or post tax clearances in Members’ Voluntary Liquidation cases”. Instead, the responsibility now falls to the Insolvency Practitioner to use their professional judgement to close cases. The change of rules should see the whole process speed up, and funds issued to shareholders sooner.
Working together.
Whatever your situation, our insolvency team are always on-hand to offer support to directors and shareholders. We work closely and collaboratively to understand your needs and those of the business to ensure all stakeholders see a satisfactory resolution. This collaborative approach has become increasingly important with this recent change in process. As a business director, you should work openly with them, your accountants and tax advisers to make sure all matters relating to tax are fully concluded before the start of the MVL.
Considering a liquidation? Speak to our team.
Now may not be the right time for you to liquidate your business, but even if you’re in the process of considering your options it’s always worth a chat with one of our experts. If you have any questions about this, or any other matters relating to insolvency, get in touch and let’s see how we can help.
This article was correct at time of publication.
