Members’ Voluntary Liquidation vs Strike Off
The Differences Between MVL vs Striking Off
Striking off application by a company
The Striking Off route is best suited to companies which have net assets up to £25,000.
If the assets to be distributed to shareholders are less than £25,000, shareholders can automatically get capital gains treatment on a strike off (no prior application to HM Revenue & Customs required), but if the assets are above £25,000, the tax treatment will be as dividends so income tax.
Before applying to strike off a limited company, it must be closed down legally.
A notice is also advertised in the London Gazette.
A company is not eligible for striking off if, in the previous three months, it has:
A company is also not eligible if it is subject, or proposed subject, to any insolvency proceedings or compromise arrangement.
If a company does not meet these conditions, it will have to be voluntarily liquidated.
Additional considerations for striking off
- Bona Vacantia: If the company has any remaining assets when it is dissolved, these automatically vest with the Crown.
- Keeping records: Business documents must be kept for seven years after the company is dissolved.
- Director liability: If a director fails to comply with the rules regarding a company’s application for striking off, he can be held personally liable to a fine and possible prosecution.
- Restoration: A company can be restored to the register within six years of dissolution.
Members’ Voluntary Liquidation
This route is best suited to companies which have net assets in excess of £25,000 or are not eligible for a striking-off application and are solvent.
Benefits of a Members’ Voluntary Liquidation?
Capital gains tax normally leads to lower tax bills than dividends, but not always, so check with your personal tax accountant first. If you do not have a personal tax accountant, we can help you.