Why do I need to formally liquidate a solvent company?

March 25, 2020 / FAQs

Why would you close down a solvent company using a liquidator?

It sounds counter-intuitive that you would appoint an Insolvency Practitioner to liquidate a company that is solvent and is not suffering any financial difficulties. However, there are times when this is the best option for you when you are ready to close down your solvent company.

How to close a solvent company

Striking off 

You may have a solvent company that you no longer need because, for example, you are retiring or taking up a PAYE role. So, how do you go about closing it?

You can dissolve your company by having it removed from the register by Companies House. This is known as “striking off” and basically makes your company non-existent. To do this you, as the director, need to complete a striking off form (DS01) which costs £10.

However, this is not always the best option.

Members’ Voluntary Liquidation (MVL) 

A Members’ Voluntary Liquidation (MVL) is a legal, HMRC-approved process where you appoint a licensed insolvency practitioner to formally liquidate your company. (Only an insolvency practitioner can liquidate a company.)

There is a fee to pay when you go down the MVL route, but this is out-weighed by the many benefits compared to simply striking off your company.

The benefits of liquidating a solvent company

An MVL is normally the most tax-efficient way to close down a company if the company’s assets are more than £25,000. This is because the funds distributed to the shareholders of the company are subject to Capital Gains Tax, rather than Income Tax. This means that the savings available to you can amount to thousands of pounds.

There are also additional tax advantages thanks to Entrepreneurs’ Relief. This scheme enables (eligible) entrepreneurs who are selling all or part of their business to pay just 10% in Capital Gains Tax (CGT) on profits over the lifetime of their business – up to a lifetime limit of £1 million.  This 10% CGT rate is considerably less than the 18% (for basic rate income tax payers) or 28% (for higher rate payers) that would otherwise be charged.

Why use Clarke Bell for your MVL?

The key features of our MVL service are:

  • Shareholders get their funds quickly – in full, after 35 days from the date the company goes into liquidation
  • Our MVL fee is just £995 +VAT +disbursements
  • The process is done via email and our Client Portal – so there is no need for a face-to-face meeting
  • Over 2,000 solvent companies have successfully gone through the MVL process with us
  • We have distributed more than £300 million to shareholders
  • The ICAEW regulate us – so you can be assured of the high level of our professional service
  • We have been trading for over 28 years, in which time we have built up a wealth of experience and expertise.

If you’re looking to close down your solvent company, or would like to find out more information about a Members’ Voluntary Liquidation (MVL), contact us now. 

You can have free advice to discuss your options.