Advice for Accountants: How We Can Help Your Clients

November 9, 2023 / Advice For Accountants

As an accountant you are a key and trusted source of advice for your clients. They will seek your help for a wide range of things. However, there will sometimes be areas in which you cannot provide the level of assistance they need – such as if their company has no way of paying its debts or if they want to liquidate a company.

This is where Clarke Bell can help.

We are a well-established firm of corporate insolvency practitioners, specialising in liquidations and administrations. (We do not provide general accounting advice.) We help accountants and their clients across the whole country. The two main areas we deal with are insolvent liquidations (CVLs) and administrations, and solvent liquidations (MVLs).

Our aim is to help directors in the best and most cost-effective way possible, depending on their particular situation.


Insolvency is a term that refers to companies with more debts than assets, or that cannot repay their debts as they come due. Companies that meet this description must take immediate measures to deal with the situation. Continuing operations as normal may well be perceived as director misconduct. To identify possible recovery methods, or whether recovery is possible at all, the services of an insolvency practitioner (like Clarke Bell) are vital.

Signs of upcoming insolvency in a limited company

As an accountant, having your finger on the pulse of a client’s financial health is good practice. It can help you provide advice to your client at just the right time, possibly averting any would-be financial crises. This can also be the case for insolvency, as knowing the typical warning signs of insolvency in a limited company can help you steer your client clear of the problem.

There are a series of warning signs that can indicate potential insolvency in a limited company, including:

  • reaching borrowing limits, to the extent that additional credit is difficult or outright impossible to obtain
  • struggling to pay operational costs, such as employee salaries and stock.

Both of these warning signs can usually be spotted by accountants, if they can be keeping track of their clients’ company finances.

Arguably, the most severe warning sign is creditor pressure. Rapidly increased creditor pressure for repayment of their bills often acts as a health check. If the demands for repayment cannot be met, then the company is likely to be on the brink of insolvency, if not already insolvent.

Testing for insolvency in a limited company

While the above warning signs can certainly be useful to give an idea of financial health, they are largely passive indications. For a more active approach, accountants and directors can make use of two insolvency tests that can be conducted at any time to produce actionable information. These tests are called the cash flow insolvency test and the balance sheet insolvency test.

  • A cash flow insolvency test is a tool that can be used to glean information over the short term. It can be used to predict immediate financial difficulties and insolvency, and the accuracy decreases as the time period under analysis increases. To conduct a cash flow insolvency test, you will need to assess your client’s cash flow over a period of time. If a cash flow analysis shows that a company has more outgoings than revenue, or that the company cannot repay its upcoming debts, then impending insolvency is likely.
  • A balance sheet insolvency test can be used to predict insolvency upcoming in the long term. This test can be conducted by performing a thorough examination of a company’s balance sheet, making note of all assets owned by a company and all of its liabilities. If a company is found to have more debts than assets, then it can be considered balance sheet insolvent. While this doesn’t mean a company will encounter financial difficulties in the immediate term, balance sheet insolvency clearly shows the path a company is on.

Liquidity ratios are often calculated by accountants to show whether their client passes the cash flow test. A lot of modern forecasting and budgeting software contain these ratios which are designed to show various levels of liquidity. The “acid test” is cash at bank less all current liabilities.

There are ‘softer’ tests which incorporate additional current assets such as debtors and stock / work in progress.

While a lot of accountants will be familiar with these from their exam days, they are much easier to calculate now, as they are normally included in forecasting software.

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Clarke Bell have been liquidating companies since 1994

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Creditors’ Voluntary Liquidation – advice for accountants

A Creditors’ Voluntary Liquidation (CVL) is one of the most common procedures used by insolvent companies. It gives directors of insolvent companies a way to close down the company efficiently, while ensuring their creditors are repaid, as far as possible, and their legal obligations are fulfilled. The procedure also provides other benefits, such as certain legal protections, more of which can be read about in our complete guide to Creditors’ Voluntary Liquidations.

If your client is facing insolvency and considering a CVL, they are likely to have a range of questions, including concerning their legal obligations as company directors and whether they can claim any redundancy payments with a CVL.

We can help answer these questions, and any others that you and your clients may have.

You can be involved in the CVL process as much as you want. We can work directly with your client, or we can liaise with you instead. Normally, it is a combination of these two approaches. For work you do in helping to close the company, you can normally earn a “statement of affairs” fee.

Other insolvency solutions

Whilst CVLs are the most popular way to deal with an insolvent company, there are other options – including Administrations and Company Voluntary Arrangements (CVAs).

These options are far rarer, but are right for some situations. If they are the better option for a client, we will always recommend that solution.

Another option is to let a company go into compulsory liquidation. However, this is not a solution that we would recommend.

It is important to be aware that a company cannot be dissolved it has any debts. Whilst directors might be tempted to try to “sneak” their company through this process, it will be rejected by one the creditors.

Solvent liquidations

The other key area we help accountants with is when you have a client who no longer wants a solvent limited company, and wants to close it down in the best way possible. This could be because they are taking up a PAYE role or retiring.

There are options available to the directors, such as dissolving the company or keeping it open. However, when the assets are of a certain size, the best way of closing the company is with a Members’ Voluntary Liquidation because of the considerable tax advantages.

Members’ Voluntary Liquidation – advice for accountants

A Members’ Voluntary Liquidation (MVL) is an HMRC-approved procedure for solvent companies to close down in a highly tax-efficient way. Under this procedure, directors and shareholders of solvent companies, typically with retained profits in excess of £25,000, can extract the assets from their company in the most effective possible way.

An MVL’s tax efficiency is made possible largely through two means:

  • a Capital Gains Tax categorisation
  • Business Asset Disposal Relief (BADR) – formerly known as Entrepreneurs’ Relief.

In an MVL, all extracted profits are taxed under Capital Gains Tax rates, rather than Income Tax rates. This results in a considerable reduction of the overall tax bill.

BADR may also apply to your client. If they are eligible, BADR can provide an additional large tax reduction up to a lifetime limit of £1 million.

If your client is looking to close their company via an MVL, we can help.

Our MVL options start from £995 +VAT +disbursements.

This means that your client can extract the bulk of their profits at a very affordable cost. You can be involved in the process as much as you want. We can work directly with your client, or we can liaise with you instead. For the work you do for your client in helping to close their company, you can charge them a “closure fee”.

To carry out the MVL procedure as quickly and efficiently as possible, we require a series of documentation detailing the company’s financials and other information. To make this easier for you and your client, and to help keep you in the loop, we will set up a client portal for straightforward communication. This client portal allows you and your client to quickly store all the necessary documentation, along with providing regular updates on the procedure. While the client portal offers access to key information points, we will still be available to answer any questions you may have.

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Clarke Bell have been liquidating companies since 1994

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Can an accountant close a limited company?

Directors often ask us if their accountant can put their company into liquidation. However, as you are probably aware, unless an accountant is also a licensed insolvency practitioner, they cannot put a company into liquidation.

A licensed insolvency practitioner (like Clarke Bell) must always be appointed to liquidate a company. Accountants provide valuable assistance to that insolvency practitioner, including helping clients to:

  • prepare the necessary documentation required to carry out the procedure before the appointment of an insolvency practitioner. This can speed up the process.
  • interact with certain parties, such as HMRC
  • helping to ensure the tax-savings with an MVL are maximised.

Clarke Bell can help

There are two main areas that we can help you with:

  1. if you have a client who is struggling with their company’s financial situation and wants to pro-actively deal with the situation. The best option is normally a CVL or an administration. Or, it could just be advice on how to deal with their creditors.
  2. if you have a client who wants to close down their solvent company in the most tax-effective way i.e. with an MVL.

Clarke Bell have more than 29 years of experience in helping accountants and their clients with the liquidation process for limited companies. We work with accountants and their clients across the country. Face-to-face meetings are not needed, but can be arranged as appropriate.

Contact us today for free, confidential advice.

(Or, you can get your client to contact us directly.)