Change in circumstances – closing your business in the most tax-efficient way

Whether you are considering the point of retirement or looking to re-enter the world of permanent employment, if you are looking at closing your company then make sure you do it as tax-efficiently as possible.

A Members Voluntary Liquidation (MVL) is the most popular method for contractors to close their solvent company in a cost-effective way. MVLs are often utilised as an exit planning tool when a profitable company has reached the end of its useful life, where shareholders are keen to extract the profits of their investment, or if its directors are approaching retirement or otherwise looking to depart from the business for any other reason.

It is also very advantageous for contractors, outside IR35, going back to permanent employment and who wish to reduce the hassle of potential IR35 investigation.

Why use an MVL:

  • It is a quick process and can usually be completed within weeks
  • You can distribute cash reserves as capital and extract any funds in the business in cash
  • Funds can be subjected to Entrepreneurs’ Relief meaning you only pay 10% tax and can use CGT allowances

Is this the right option for me – key criteria to consider:

  • Do you have reserves over £25,000 (after paying all final liabilities)?
  • Has your company traded for over 12 months?
  • Are the shareholders directors / employees?
  • Are you unlikely to trade again via company for 2 years?

If the answer to the above is yes and you are considering closing your solvent company using an MVL, then speak to KPP who can advise on the process.

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