What is Members’ Voluntary Liquidation (MVL)?
Members’ Voluntary Liquidation (MVL) is a legally compliant, tax-efficient way to close a solvent company with over £25,000 in retained profits.
The benefit of an MVL is that it typically allows distributions to shareholders to be treated as capital, rather than income. This allows them to be taxed under Capital Gains Tax (CGT) rates, which are often lower than Income Tax.
Most directors also qualify for Business Asset Disposal Relief (formerly Entrepreneurs’ Relief), reducing the CGT rate on qualifying assets—a significant tax saving compared to the higher rates applied to income.
How Do the 2025 Tax Changes Affect MVLs?
If you wait too long to start your Members’ Voluntary Liquidation, you could lose a huge tax advantage.
Currently, most directors qualify for Business Asset Disposal Relief (BADR), which reduces the CGT rate to 10% on qualifying assets. From 6 April 2025, gains eligible for BADR will be taxed at 14%. And from 6 April 2026, gains eligible for BADR will be taxed at 18%.
If you’re the director of a solvent business with £25,000+ in retained profits, acting now means you can take advantage of the current tax benefits before they change.
How the MVL Process Works
- Speak to our MVL experts: Working with a licensed insolvency practitioner is a legal requirement of an MVL. The added benefit of their involvement is that they guide you through the process—and often do a lot of the legwork.
- Prepare a Declaration of Solvency: This is a critical legal document and must be accurate. In it, all the company’s directors must confirm its solvency and its ability to pay all debts within 12 months.
- Pass a resolution to wind up the company: Your shareholders need to approve the liquidation through a formal resolution. This resolution must then be filed with Companies House.
- Appoint a liquidator: Your insolvency practitioner acts as the liquidator. They manage the sale of assets, payment of creditors and the distribution of remaining funds to shareholders.
- Distribute funds to shareholders & finalise the liquidation: After your creditors are paid in full, the liquidator distributes any remaining funds to shareholders as capital. After this step is complete, they file a final report with Companies House. The company is then officially dissolved.
