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Members’ Voluntary Liquidation (MVL)

A Members’ Voluntary Liquidation is a formal, tax-efficient way to close a solvent company and distribute retained profits or assets to shareholders.

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What is a Members’ Voluntary Liquidation?

A Members’ Voluntary Liquidation is a formal way for Directors to close a solvent company. It allows shareholders to extract the remaining business value in a controlled, tax-efficient manner.

To carry out an MVL, the company must appoint a licensed Insolvency Practitioner. They manage the process, settle debts (if applicable), and distribute the remaining assets to shareholders. These payments are taxed as capital gains rather than income, which typically results in a lower tax bill.

Many shareholders also qualify for Business Asset Disposal Relief (BADR), which reduces the effective Capital Gains Tax rate to 18%.

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John Bell

Senior Partner | Licensed Insolvency Practitioner

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What is a Members’ Voluntary Liquidation?

A company is eligible for a Members’ Voluntary Liquidation if it is solvent, meaning it can repay all its debts and liabilities in full within 12 months. Directors must sign a declaration of solvency to confirm this, and the company must have its accounts and paperwork in order.

An MVL is usually cost-effective when a business has retained profits of more than £25,000, allowing shareholders to benefit from significant tax savings. Companies that do not meet these requirements may need to consider a Creditors’ Voluntary Liquidation or a company strike-off instead.

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Tax benefits of a Members’ Voluntary Liquidation

One of the primary reasons Directors opt for a Members’ Voluntary Liquidation is the substantial tax savings compared to simply dissolving the company and distributing the remaining funds as dividends.

Capital vs Income Tax:

MVL distributions are taxed as capital at 18% for basic rate taxpayers and 24% for higher-rate taxpayers. By contrast, dividend Income Tax can be charged at up to 45%. This makes MVLs far more tax-efficient for many shareholders.

Business Asset Disposal Relief (BADR):

Eligible shareholders can reduce their Capital Gains Tax rate to 18%, subject to the £1 million lifetime limit. BADR (previously called Entrepreneurs’ Relief) is especially valuable for retiring Directors, contractors affected by IR35 and business owners moving into new ventures.

These benefits make an MVL a highly tax-efficient way to close a solvent company. When retained profits exceed £25,000, the tax savings typically significantly outweigh the costs.

How does the Members’ Voluntary Liquidation process work?

An MVL follows a set of formal steps to wind up a solvent company. The process ensures debts are repaid, creditors can submit claims, and remaining assets are distributed to shareholders. With proper preparation and the assistance of a licensed Insolvency Practitioner, the MVL process is usually straightforward.

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Step 1: Information gathering

We’ll complete statutory Money Laundering and Identity checks for each Director and any shareholder with more than 25% of the company’s shares. Once approved, we’ll send a Letter of Engagement and Payment Request. After these are signed and paid, we’ll request further company details, including final accounts and corporation tax returns.

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Step 2: Declaration of solvency

Directors sign a sworn statement in front of a solicitor confirming the company can repay its debts in full within 12 months. This is a legal requirement, and making a false declaration is a criminal offence. The declaration can be sworn face-to-face or remotely.

3

Step 3: Appointing a Liquidator

Shareholders pass a resolution to place the company into liquidation and appoint a licensed Insolvency Practitioner. From this point, the Liquidator takes control of the company.

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Step 4: Settling creditors

Any remaining debts are repaid. Many Directors choose to pay creditors before liquidation begins, as statutory interest of 8% above the base rate applies once the process starts. The Liquidator will also publish notices in The Gazette, giving creditors 21 days to submit any claims they might have.

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Step 5: Distributing assets

After debts are cleared, remaining assets are distributed to shareholders. This is usually cash, but property or equipment can also be transferred directly. This is known as a distribution in specie.

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Step 6: Company dissolved

Once all matters are settled, the Liquidator obtains clearance from HMRC. The company is then removed from the Companies House register and formally dissolved.

How much does a Members’ Voluntary Liquidation cost?

With Clarke Bell, the cost of a Members’ Voluntary Liquidation starts at £1,245 plus VAT and disbursements. The exact fee depends on the number of shareholders, the type of assets in the company, and how quickly shareholders want to be paid. We offer three fixed-fee MVL pricing options:

When you receive your money How it works Cost (excl. VAT and disbursements)
Funds stay in your control throughout Directors withdraw funds before our appointment. After 21 days, the Overdrawn Directors Loan Account (ODLA) is distributed in specie (days 22–35). From £1,245
Quick transfer (within 35 days) The only asset is Cash at Bank. The bank balance is transferred to our client account before appointment to avoid delays. From £1,245
Standard payout (after 35 days) Assets include Cash at Bank. After appointment, we request the bank close the account and release the funds to a client account. Timing depends on the bank, but distribution is usually 35+ days. From £1,495

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Members’ Voluntary Liquidation timeline: How long does an MVL take?

In most cases, a Members’ Voluntary Liquidation is completed in around three months. The timeline can vary depending on the complexity of the company’s affairs and the level of preparedness of the Directors at the outset.

The process is usually smooth and fast when records are in order and liabilities have been settled. Directors who gather documents early and clear debts in advance often see distributions to shareholders within about 35 days. More complex cases, or those delayed by HMRC clearance, may take longer.

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MVL vs strike-off vs CVL: Which option is best?

Business owners usually compare an MVL with a company strike-off. Strike-off is a simpler and cheaper process, but it is usually only tax-efficient when profits are below £25,000. An MVL is more suitable when profits are higher, as the tax savings from the MVL process outweigh the costs.

If the company cannot repay its debts in full, it is not eligible for an MVL. In this case, the best procedure is normally a Creditors’ Voluntary Liquidation (CVL), which is designed for insolvent companies.

Feature MVL Strike-off CVL
Solvent Company Yes Yes No
Tax-efficient treatment of funds Yes Yes No
Suitable for retained profits over £25,000 Yes No No
Requires Insolvency Practitioner Yes No Yes
Formal liquidation process Yes No Yes
Typical cost From £1,245 + VAT and disbursements Low From £1,995 + VAT depending on complexity

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Why choose Clarke Bell for your Members’ Voluntary Liquidation?

When a company is placed into an MVL, a licensed Insolvency Practitioner must be appointed to manage the process. Their role is to ensure debts are settled, statutory requirements are met and remaining assets are distributed correctly. Clarke Bell has been carrying out MVLs for over 30 years and offers a clear, fixed-fee service.

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Get clear advice on whether an MVL is the right option for your company, how the process works, and what it is likely to cost.

“I just cannot fault the service I received from Elizabeth and her team during the voluntary liquidation of my company due to my retirement. Would recommend them every time – made what I first thought a very complex procedure very easy” – Alan

Speak to an MVL Expert
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Elizabeth Scott

Corporate Insolvency Manager

Frequently Asked Questions

General FAQs

An MVL is most suitable when you no longer need your company and you want to extract retained profits in a tax-efficient way. Many Directors choose this route when retiring, moving into employment, or starting a new venture.

Yes. An MVL is a formal legal process that a licensed Insolvency Practitioner must manage. They oversee creditor notifications, prepare statutory filings, and ensure assets are distributed correctly. Their role is to guide Directors through the process and ensure it is fully compliant with insolvency law.

Most MVLs are completed in around three months. In most cases we deal with, shareholders receive funds within 35 days. Complex cases may take longer, particularly if HMRC clearance is delayed.

As a guideline, an MVL is usually worthwhile when retained profits are over £25,000. At this level, the tax savings typically outweigh the costs of the process. For smaller amounts, a company strike-off may be more cost-effective. Your accountant will normally be able to guide you on this.

Disbursements are third-party costs paid during the liquidation, separate from the Insolvency Practitioner’s fee. These include statutory advertisements in The Gazette (currently £388.80) and a statutory bond (ranging from £55 to £205 depending on the company’s asset value). These costs are mandatory for all MVLs and provide transparency and shareholder protection.

Once all assets have been distributed and HMRC has cleared the final accounts, the Liquidator files the necessary documents with Companies House. The company is then dissolved and removed from the register, meaning it no longer exists as a legal entity.

Contractors FAQs

For many contractors, yes. If you are no longer contracting and your company has more than £25,000 in retained profits, an MVL allows you to close it down and extract funds in a tax-efficient way. Compared to a strike-off, this usually results in a much lower tax bill.

If you meet the eligibility rules, such as holding shares for at least two years and owning at least 5% of the company, you may qualify for BADR. This reduces the Capital Gains Tax rate to 18% and can significantly increase the amount you take home.

If you claim BADR, anti-avoidance rules may prevent you from immediately setting up a new company carrying on the same trade. Clarke Bell can advise you on how these rules might apply to your circumstances and the best timing for future business plans.

Directors FAQs

A majority of Directors must sign the declaration of solvency in the presence of a solicitor. This confirms that the company can repay its debts in full within 12 months. It is a legal requirement, and making a false declaration is a criminal offence.

If the company cannot repay its debts after entering an MVL, the process must be converted into a Creditors’ Voluntary Liquidation (CVL). At this point, the Liquidator will deal with creditor claims, and the company’s affairs will be investigated to ensure Directors have acted properly.

Yes. An MVL does not place restrictions on future Directorships. Unlike insolvent liquidations where Directors may face investigations or restrictions, you can continue to be a Director in another company during or after the process.

Further Reading on Members’ Voluntary Liquidation

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Secure a tax-efficient company closure with Clarke Bell

A Members’ Voluntary Liquidation is recognised as a highly tax-efficient way to close a solvent company and maximise the value returned to shareholders.

Over the last 30 years, Clarke Bell has completed over 4,000 MVLs, distributing more than £560 million to shareholders. With fixed fees starting at £1,245, we can provide you with a smooth, compliant, and cost-effective service to close down your company.

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