Frequently Asked Questions

An MVL is a formal process used to close a solvent company, meaning it can pay all its debts in full and on time, with significant profit left over.

It’s initiated voluntarily by directors to distribute the company’s assets to shareholders, often in a tax-efficient way. This approach is usually preferred to a Company Strike-Off [link to page] when the company has significant retained profits or assets and the directors wish to extract them in the most advantageous way.

Find out more about Members’ Voluntary Liquidation

Currently, MVLs offer several tax advantages. 

1. Distributions to shareholders are typically treated as Capital Gains, which are usually taxed at a lower rate than income tax. 
2. Many directors qualify for Business Asset Disposal Relief (formerly Entrepreneurs’ Relief), reducing the Capital Gains Tax (CGT) rate to 10% on eligible assets. These factors can lead to substantial tax savings compared to withdrawing profits as dividends.

From April 2025, the tax benefits associated with Business Asset Disposal Relief will be reduced. Until 6 April 2025, gains eligible for Business Asset Disposal Relief (BADR) will be taxed at 10%. For disposals made on or after 6 April 2025, this tax will increase to 14%. This will increase to 18% from 6 April 2026. 

This means that the tax advantages of using an MVL are diminishing, making it crucial to act before the changes come into effect to take advantage of the lower 10% rate, if this is applicable to you.

For a company to undertake an MVL it must be solvent, which means it can pay all its debts in full within 12 months of the start of the liquidation process, including any future or contingent debts. 

Directors must also make a sworn declaration, confirming the company’s solvency. This declaration requires that directors have undertaken a full investigation into company affairs and have concluded that the company is able to pay its debts within that 12-month period. Falsely stating this will result in prosecution.

Find out more about Members’ Voluntary Liquidation

he MVL process involves several key steps. 

1. You need to consult with a licensed insolvency practitioner to make sure it’s the right option for you. 
2. The directors must prepare and swear a declaration of solvency. 
3. Shareholders must then pass a resolution to wind up the company, which is filed with Companies House. 
4. A liquidator, who is often the insolvency practitioner you originally consulted, is appointed to manage the process, including the sale of assets, payment of creditors, and distribution of funds to shareholders. 
5. After the process is complete, a final report is filed with Companies House and the company is dissolved.

Find out more about Members’ Voluntary Liquidation

It’s a legal requirement to use a licensed insolvency practitioner for an MVL. They are necessary to navigate the complexities of the process, ensuring that the company’s closure adheres to all legal requirements. Their involvement has the added benefit of mitigating the risk of future disputes with creditors or HMRC and helps to guarantee the whole process runs smoothly and compliantly.

While an MVL is often the best choice for companies with significant retained profits or assets (typically over £25,000), it’s not automatically the correct path for every company in this position. 

Each company is different, and has specific legal and financial circumstances that will need to be considered on a case-by-case basis. It’s crucial to seek professional advice to ensure an MVL is the most suitable solution. Directors should consider their eligibility for Business Asset Disposal Relief, and also if they wish to extract any future assets/profits from a similar business they plan to run.

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Insolvent liquidation (formally known as Creditors’ Voluntary Liquidation [link to page]) is a formal process for companies that cannot pay their debts or whose liabilities exceed their assets. It’s a structured way to wind down operations, repay creditors as much as possible from the liquidated assets and, ultimately, close the company.

Insolvent liquidation is appropriate when a company’s financial difficulties mean there’s no chance of recovery. Some common indicators include:

• inability to pay debts on time.
• overwhelming liabilities that exceed the company’s assets.
• creditor pressure such as persistent demands or court actions.
• outstanding HMRC debts.
• unmanageable Bounce Back Loans repayments.

You can contact FTS MVL’s team of licensed insolvency practitioners for free, confidential advice. You can call 0800 054 6580 to speak to someone between 8:30am and 5:30pm Monday – Friday (excluding public holidays).