What MVL Tax Changes Are Coming In April 2025?
What is a Members Voluntary Liquidation (MVL)
A Members Voluntary Liquidation (MVL) is a procedure for a UK solvent company at the end of its useful life.
They are often used either when the business has been sold, or the directors/members are ready to retire.
Usually, all creditors will have been paid off and assets sold leaving the company with a pot of cash to distribute to its members (aka shareholders).
What have been the benefits of an MVL?
For many years MVL’s have been a useful procedure for shareholders of solvent limited companies to extract their cash in a tax-efficient way, because the cash distributed by the Liquidators to the shareholders is treated as a capital gain rather than income.
This means that shareholders can find their tax reduced from 40% to 24% (effective from October 2024). Furthermore, eligible shareholders can claim Business Asset Disposal Relief (“BADR”) and the capital gain is then taxed at only 10% for the remainder of the 2024/2025 tax year.
What Tax changes are coming in April?
So what is changing? From 6 April 2025, this rate will be increasing from 10% to 14%, followed by a further increase to 18% from 6th April 2026.
Shareholders should seek advice from their personal accountants as to whether they fit the BADR criteria.
How Parker Andrews Can Help
Our advice is that anyone considering an MVL in the near future should, after taking advice from the companies and their own accountants, leave sufficient time for the company to be liquidated and the distributions paid prior to 5th April 2025 to avoid paying the increased tax when the new legislation comes into force.
We can liquidate a company very quickly, subject to how proactive the directors are at providing us with the necessary information and accounts required, and, subject to circumstances, aim to pay an initial distribution of 80-90% within 7 days and the balance is often able to be paid 6-8 weeks later.
An MVL is a relatively simple procedure. Our experienced team at Parker Andrews will help prepare all of the necessary paperwork for the directors and shareholders to sign.
Get in touch with our experienced and knowledgable practitioners who can provide support.
