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Do you have a company that has come to the end of its useful life?
A Members Voluntary Liquidation (MVL) may be a tax efficient way of extracting money from a company that ceases to trade.
Extracting from solvent companies – Is a striking off really the answer?
When a solvent company has come to the end of its useful life the problem has always been how to extract the cash or assets quickly without the shareholders incurring high rates of income tax.
Where there are residual funds in excess of £25,000, the full amount will be treated as dividends to shareholders unless the distributions are made through a formal liquidation. All distributions made through a Members Voluntary Liquidation receive Capital Gains Tax (CGT) treatment.
With entrepreneur’s relief, money paid to shareholders will only be subject to tax at 10% on the capital gain.
There may be additional benefits to a formal liquidation, especially if there are potential creditor liabilities that may come to light.
It seems to be an opportune moment as we move towards the tax year end to think about MVLs. By making a capital distribution on either side of the tax year end two years worth of annual exemptions can be used to reduce your CGT bill.
A Licensed Insolvency Practitioner is required to carry out a solvent Members Voluntary Liquidation.
If you think that an MVL may be a means by which you can extract funds from your company and keep your tax bill down to a minimum please contact us.
An initial consultation is with our compliments.
Elaine Wilcox - Business Recovery and Insolvency Consultant
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