Time to wind up your company using the MVL process
For a few years now, shareholders seeking to close down their company and draw out the surplus cash and other assets as a capital distribution (at 10% effective Capital Gains Tax with Entrepreneur’s Relief) had to use the MVL process if they had reserves of more than £25,000.
In April 2016, the Government clarified the tax position for shareholders using the MVL in two ways – firstly to say that it comes within the Transactions in Securities anti-avoidance legislation. A new Targeted Anti-Avoidance Rule was also introduced to tackle phoenixism, i.e. situations where shareholders remove their money at 10% tax rate and use some of the funds to quickly go back into business again.
While the rules have tightened, MVLs continue to be used successfully by shareholders who want to wind up their solvent business and extract their cash in a tax-efficient manner.
Our experts at Gildernew & Co have specific experience in the new phoenix rules, the rules around pre-liquidation dividends, securing advance clearance from HMRC and in finding workable solutions.
Posted on November 29, 2017