Tax and Members’ Voluntary Liquidations

Distributions to shareholders and Entrepreneurs’ Relief

An MVL is an attractive option to wind-up a company’s affairs because a Liquidator’s distribution to shareholders is classed as capital, not income. Subject to the shareholder’s personal tax position, there are potential significant tax savings in an MVL.

In most situations, capital gains tax is comparatively lower than income tax and further savings are available if shareholders qualify for Entrepreneurs’ relief.

Entrepreneurs’ relief reduces the rate of capital gains tax on disposals of certain business assets from 20% to 10%.

Further information can be found at GOV.UK.

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.

This information is only provided for general information purposes. For specific advice on your individual circumstances, consult your personal tax advisor. If you do not have a personal tax advisor, we can help you.

Value Added Tax

If the company was or is VAT registered, then the VAT on the costs of the liquidation can be reclaimed by a Liquidator and these funds returned to shareholders when the MVL is ready to close.

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