Members Voluntary Liquidation
Discussion
I have decided to take a permanent job offer and will be finishing up my current freelance role in a couple of weeks. This is my second spell of freelancing in the last 5 years, but previously I just left the company (PSC ltd company) open and didn't touch the money left in its accounts.
This time, and with IR35 on the horizon and a young family, I can't see myself returning to contracting. So I plan to liquidate the company (MVL) and benefit from entrepreneurs relief. While I do further research online (I'm really not that tax-savvy!) I thought I would ask here what the likely pitfalls could be or more generally for some advice please.
This time, and with IR35 on the horizon and a young family, I can't see myself returning to contracting. So I plan to liquidate the company (MVL) and benefit from entrepreneurs relief. While I do further research online (I'm really not that tax-savvy!) I thought I would ask here what the likely pitfalls could be or more generally for some advice please.
No real huge issues tbh.
Depends really how much money is currently sitting in the company bank account, I don't expect you to put figures on a forum, but as you are taking full time employment this does make a MVL more attractive (as taking dividends could be taxed at 32.5% (if below £100k)).
Obviously a liquidator needs to be appointed, cost of MVL have come down, no idea if you are VAT registered or not, but if you are VAT is often reclaimed on the fees etc.
To make the MVL as cheap as possible, close PAYE scheme, make sure all taxes are up to date and balances are nil. This will speed up the process and keep costs down.
It all really depends how much cash is left in the business and what your circumstances are, in terms of full time employment wage.
For example if say £40k cash left in company, but your full time employment is say £30k a year, in this tax year (providing no other income) you could have dividends of £20k and pay 7.5% (ignore £2k tax free for now).
Depends really how much money is currently sitting in the company bank account, I don't expect you to put figures on a forum, but as you are taking full time employment this does make a MVL more attractive (as taking dividends could be taxed at 32.5% (if below £100k)).
Obviously a liquidator needs to be appointed, cost of MVL have come down, no idea if you are VAT registered or not, but if you are VAT is often reclaimed on the fees etc.
To make the MVL as cheap as possible, close PAYE scheme, make sure all taxes are up to date and balances are nil. This will speed up the process and keep costs down.
It all really depends how much cash is left in the business and what your circumstances are, in terms of full time employment wage.
For example if say £40k cash left in company, but your full time employment is say £30k a year, in this tax year (providing no other income) you could have dividends of £20k and pay 7.5% (ignore £2k tax free for now).
I did pretty much exactly this recently (started the process in November, finally payout in February) in similar circumstances, having started a permanent role last May (I kept the company going until I was comfortable enough with the new role and had sorted out things like mobile phones etc)
I used MVLOnline, their costs were as advertised - I made sure the company was deregistered for VAT first, no longer an employer, no assets other than cash in the bank etc. Pretty simple process, bunch of things to print and sign in the first few days then you're basically done, once the balance of the company bank account was in their control they paid a 75% distribution immediately, the remaining upon everything being formally wound up. Their costs can be paid by the company.
I declaired the income on my tax return, pretty simple process. The tax saving for me was well worth it.
I used MVLOnline, their costs were as advertised - I made sure the company was deregistered for VAT first, no longer an employer, no assets other than cash in the bank etc. Pretty simple process, bunch of things to print and sign in the first few days then you're basically done, once the balance of the company bank account was in their control they paid a 75% distribution immediately, the remaining upon everything being formally wound up. Their costs can be paid by the company.
I declaired the income on my tax return, pretty simple process. The tax saving for me was well worth it.
You’ll be eligible for capital gains treatment so long as you don’t set up a substantially similar business within 2 years of the liquidation -in which case you might fall out of CGT and therefore lose any capital/ER advantages.
Whether you qualify for ER depends on the nature of the business of the company, and the nature of its assets.
Whether you qualify for ER depends on the nature of the business of the company, and the nature of its assets.
Requires an element of trust with who does the MVL for you as they will take complete control of your funds until the MVL is complete, you have no access etc to them.
Also with mine the MVL notification went into the Gazette there must be a feed to the banks as soon as the MVL notification did all my business accounts were frozen.
Finally when I did MVL part of the process requires the liquidator to ask HMRC permission to close the company, so there is some HMRC involvement in it, not sure if the incoming IR35 changes will make HMRC look more closely at MVL requests.
cheers
Also with mine the MVL notification went into the Gazette there must be a feed to the banks as soon as the MVL notification did all my business accounts were frozen.
Finally when I did MVL part of the process requires the liquidator to ask HMRC permission to close the company, so there is some HMRC involvement in it, not sure if the incoming IR35 changes will make HMRC look more closely at MVL requests.
cheers
Thanks for the replies all. Plenty of useful advice as ever.
The amount in the company is a bit over Gazza's example but definitely not 'six figs'
*hands in powerfully built directors badge*
My new perm role will be in the higher rate tax band.
Good idea to leave the company open until I'm settled in my new role and totally sure I won't go back to contracting.
The amount in the company is a bit over Gazza's example but definitely not 'six figs'
*hands in powerfully built directors badge*My new perm role will be in the higher rate tax band.
Good idea to leave the company open until I'm settled in my new role and totally sure I won't go back to contracting.
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