Why is a MVL tax efficient?

In the ordinary course of business, any funds distributed to shareholders by way way of a dividend are taxed as income.  Dividend income can currently be taxed up to 38.1% for additional rate tax payers.

In a Members Voluntary Liquidation all funds distributed are treated as a capital distribution, and subject to Capital Gains Tax (CGT) rates.  CGT rates are always lower than income tax rates; reducing the personal tax burden for shareholders and maximising the hard earned company funds to be extracted.

Extracting funds as a capital distribution comes with more benefits!  In some circumstances a shareholder may be able to claim entrepreneurs relief on funds extracted from a Members Voluntary Liquidation.  This means that any funds extracted will only be taxed at 10%, providing the qualifying conditions are met.

The main conditions for entrepreneurs relief is that the shareholder holds at least 5% of the shares in the company, and has for a period of at least 24 months, and perhaps more importantly must not trade in the same or similar industry for a further 24 month period after the relief is claimed.  Ballard Business Recovery are not tax advisers but we regularly work with accountants to agree a strategy that results in shareholder extracting funds from a Members Voluntary Liquidation in the most tax efficient manner.

Want to hear more about how a MVL can benefit you?

Contact our experts today

Ballard Business Recovery Limited, The Old Post House, 3 Sudbury Road, Yoxall, Burton on Trent DE13 8NA
Company Number: 12547285

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