There are many reasons why a director will choose to close their business if its solvent and doing well through a Members’ Voluntary Liquidation (MVL). 

It can be a strategic decision if they’re looking to move onto a new venture or retire and it remains the quickest and easiest way to efficiently release cash and assets. 

But this doesn’t entirely explain why MVLs have rocketed in the last financial year.

The surge in MVLs – Tax and Economics are driving demand

New figures released from Companies House show that the number of MVLs completed in 2024/25 was 12,602 – the second highest total on record after they reached a peak of 14,929 during the pandemic in 2020/21.

Several factors are driving the trend but changes to tax rates are a key driver. 

Companies closing under an MVL can access Business Asset Disposal Relief (BADR), previously known as Entrepreneurs’ Relief, which allows owners to extract money from their companies at a lower tax rate before closure. 

Under an MVL, distributions to shareholders are treated as capital distributions rather than dividends. This means they’re taxed at Capital Gains Tax (CGT) rates, which are lower than comparable income tax rates – it can significantly reduce the amount of tax payable.

Following the Chancellors’ Autumn Statement, the rate of BADR increased from 10% to 14% on April 1st 2025 and is scheduled to rise again to 18% from April 1st 2026. 

This increase and the further impending rise has led many business owners to review their options and several to accelerate their plans to close and realise their assets. 

Alongside tax changes, broader economic headwinds are also continuing to play a prominent role. 

Increased energy costs, employers’ NIC contributions, higher minimum and national living wage increases and ongoing economic uncertainty are convincing many directors to “cash out” early.

Key advantages

The benefits of an MVL make it a compelling procedure for directors in position to access one. 

  • Tax Efficient – as well as the ability for assets to be taxed as Capital Gains rather than income tax, shareholders may also utilise their annual personal CGT allowance making a portion of the gains tax-free.
  • Certainty – The process is structured and formal at every stage, providing a clear and clean method to close the business and accurately distribute assets.
  • Fairness – An independent liquidator manages the process and acts in the best interests of all members ensuring that assets are distributed fairly and accurately according to shareholdings. 
  • Freedom – If everything is in order and goes smoothly, the process can often be concluded in a working week or even less.
  • Effort – Directors have certain preliminary tasks they need to complete but once done and the insolvency practitioner appointed, their input is minimal.  

Is Your Company Suitable for an MVL?

An MVL is only available under specific conditions so directors have to be able to answer “yes” to the following questions:-

  • Has the company stopped trading (or is about to)?
  • Did it carry out trading activities (e.g. was in the retail, hospitality sectors etc.) as opposed to non-trading like investment?
  • Have you owned your shares in the company for at least 12 months?
  • Does the company have over £25,000 of assets to distribute to its shareholders?

If you answer “no” to any of the above, while an MVL might not be the right fit, other insolvency procedures may be suitable.

Laying the groundwork – getting your business ready

There are essential preparatory tasks that directors need to complete before engaging an insolvency practitioner. Completing these upfront is crucial, as any delays can add time and potentially increase fees. These tasks include:-

  • Confirming the company has ceased or stopped trading (or is about to).
  • De-registering for VAT and submitting a final VAT return.
  • De-registering as an employer and for any PAYE scheme, submitting a final PAYE return.
  • Instructing your accountants to prepare and submit final accounts including a final corporation tax return.
  • Ensuring all non-cash assets (director’s loans, fixed assets and stock) are dealt with (either received, sold or written-off), and collect all outstanding debts owed to the company.
  • Confirming all tax and any other liabilities have been paid in full.
  • Closing any current company pension schemes and transferring benefits (historical payments into personal schemes like SIPPs are ok).
  • Ensuring any ongoing litigation against or by the company has ended.
  • Consolidating all funds into instant access bank accounts.

Your accountant can assist in working through this checklist and answering any specific questions you may have.

The MVL Process: Step-by-Step

While the full MVL procedure involves several consecutive stages, they can often be concluded relatively quickly with the total timeline possibly being finalised within 10 days if all parties are amenable and there are no outstanding issues. 

More complicated cases and issues could take longer to resolve and formal company dissolution typically occurs three months after the case is closed and final clearance is obtained from HMRC.

After the initial preparation stage (outlined above), the next step is to contact an insolvency practitioner who will conduct all checks and assess the readiness of the business to proceed. 

There is a short window to finalise any outstanding affairs followed by paying the practitioner’s fee and withdrawing company funds – which will initially be treated as a loan until formal distribution notices are processed.

Possibly the most important step is swearing a Declaration of Solvency before a solicitor. This is where the director affirms that the company can pay its debts and is reminded that making a false declaration is a criminal offence. 

Once this has been positively affirmed a meeting of shareholders and directors is held to formally place the company into liquidation. The final stage is post-liquidation when any remaining assets are realised then distributed to creditors then members. 

In simpler cases, the funds withdrawn in Stage 4 are distributed in specie. Members may provide indemnities in complex cases to allow early distributions.

Understanding the costs

MVLs are generally considered to be less expensive than any other types of liquidation. 

Specific quotes are based on a company’s individual circumstances but the full process will most likely cost between £1,600 and £3,500 plus VAT and disbursements. 

This includes items such as a minimum fixed fee, statutory advertising in The Gazette, a general bond and signature witnessing for the Declaration of Solvency. Again, completing all preliminary tasks properly helps keep costs down by avoiding any additional work.

Members’ Voluntary Liquidations provide a clear, efficient and tax effective process for directors to close a solvent company and realise the value built up over the years. 

Get in touch with us today to discuss how an MVL can allow you to move confidently towards your next chapter.