MVL Case Studies
Case Study 1 - Solar Panel Company
The directors of a solar panel company approached us when they decided to close their business. They sought our help to extract the value of shares in the company (almost £1 million) in the most tax efficient manner possible.
We recommended placing the company into a solvent liquidation (known as Members Voluntary Liquidation or MVL) with a view to making a capital distribution to the shareholders.
Following the withdrawal of Extra Statutory Concession c16 (concerning distributions to shareholders when a company is struck off the register at Companies House without first being formally liquidated), in the absence of a MVL, any distributions to shareholders exceeding £25,000 would be treated as income rather than a capital distribution. A capital distribution carries a substantially lower tax charge for the shareholders, when compared to tax charged on income. In cases where distributions to shareholders are made via a MVL, the £25,000 restriction on capital distributions doesn’t apply, potentially saving shareholders considerable amounts of tax on larger distributions.
We worked closely with the company accountant and the directors to ensure that all records were up to date and all outstanding debts were paid prior to the closure of the company. In this case we were able to distribute almost £1 million to the shareholders, potentially saving them c£140,000 each.
Case Study 2 - Film Making Company
The directors of a film making company approached us after their company had ceased trading sometime ago and they now wanted to close the company. All company debts (including HMRC) had been paid. They sought our help
to distribute their director’s loans with a total value of £152,000 in the most tax efficient manner possible.
We recommended placing the company into a solvent liquidation with a view to making a capital distribution ‘in specie’ (distribute the rights to the loans to shareholders’) This could be done immediately upon appointment. There were no other assets in the company and therefore, tax clearances were sort within months of appointment.
Case Study Three - Financial Services Company
The directors of a financial services company approached us when they decided to close their business and retire. There was a remaining asset of cash at bank and outstanding creditors of HMRC and us. They sought our help to
distribute the balance of cash at bank of c£140,000.
We recommended placing the company into a solvent liquidation as this was the appropriate solution and the most tax-efficient procedure. A MVL would also provide the directors with the security that distributions were being made in accordance with the law and no risk of any clawback would exist.
The funds were received shortly after appointment. An interim distribution of £120,000 was made, leaving only a minimal balance in hand to remit the final corporation tax liability and the agreed fixed fees and ancillary costs of the liquidation. Tax clearance from HMRC was sought shortly thereafter and the balance of funds was transferred once the statutory requirements of the liquidation were complied with.
You can call our offices on 0845 260 0101 to discuss your company's members voluntary arrangement with an Insolvency Practitioner in more detail.