It’s Groundhog day, again
Lots of times.
Especially if your business is profitable but you have a new idea and opportunity you want to pursue but can’t because you keep finding yourself back where you are right now – mentally if not physically.
So what can you do to change your destiny and actually enjoy the results of your hard work and sacrifices?
Fortunately there are less drastic ways than stealing a groundhog and driving into a quarry.
One of the most effective and efficient ways is to consider a Members’ Voluntary Liquidation or MVL.
What are the five stages of an MVL process?
Usually, when a limited company closes and all outstanding debts have been paid off or satisfied then the directors can draw any remaining profit as a dividend and pay the income tax due on this amount.
Using an MVL as the method to liquidate the company instead, which is carried out by a licenced insolvency practitioner, means that any reserves can be distributed as capital so they are subject to capital gains tax at a lower rate. This could represent a substantial saving.
Additionally and depending on the unique circumstances of the business and its assets, the MVL could use Business Asset Disposal Relief (BADR) – which replaced the more well known Entrepreneurs’ Relief – and could reduce the rate of capital gains tax on qualifying assets even further.
There could also be other benefits available for shareholders in closing the business this way such as tax-free allowances like the Annual Exempt Amount but tax advisors would be able to give clearer guidance on these issues.
An MVL isn’t suitable or accessible for every business.
There are certain qualifying criteria that have to be met including:
- Has the business ceased trading or is about to?
- Did it carry out actual trading activity? (not non-trading actions such as investing or advice?)
- Have you owned your shares in the company for 12 months or more?
- Are there at least £25,000 or more worth of assets to distribute to shareholders?
Contractors have additional requirements to fulfill including being a shareholder and an employee of the company on giving an undertaking that they aren’t intending to trade via a limited company for at least two years following the MVL process.
For any shareholder wanting to travel, retire, change career, become an employee elsewhere or launch a new startup business, an MVL is the ideal vehicle to transition from one role to the next.
While an MVL can be advantageous and bring several benefits there are several factors to consider.
It might not be right for your personal circumstances depending on what your next career move is.
You might have more than £25,000 in assets but it might not be entirely cost effective to pursue, especially when you factor in the liquidator’s fee and any other necessary expenses required.
The best thing to do if you’re considering closing your business through an MVL or any other way is to get in touch for some impartial professional advice.
There might be other options available to refresh and restructure a business or dispose of it in other ways – especially if you’re at an early stage of the process and considering your next move.
Whatever you end up deciding – you can change your future for the better.
No matter what some groundhog thinks.