What is solvent liquidation (MVL)?
An MVL is a formal, cost effective process for bringing the life of a company to an end and distributing the remaining assets to shareholders, in the most tax efficient way. This can be done for reasons of retirement, an intractable shareholder dispute, or simply because the company is no longer needed. The company must be solvent – i.e. it can afford to pay all of its creditors and still have funds left for the shareholders.
The main advantage of an MVL, is that it can be a tax efficient way of extracting the remaining funds from the company. This is because distributions made out of an MVL are treated as capital receipts, rather than income and are therefore subject to capital gains tax, rather than income tax. This is likely to be beneficial if Entrepreneurs’ Relief is available (there are criteria to meet).