How to close down your limited company in an efficient way

Donald McNaught

Donald McNaught

Restructuring Partner

17 January 2023

Overt the last couple of years I have written articles explaining that despite the global turmoil, it remained business as usual for contractors needing assistance winding up their limited companies in an efficient and compliant manner.

Since then, we have seen IR35 reversals and a cost-of-living crisis thrown into the mix, but the drivers for contractors we support largely remain the same.   

We have continued to see sustained demand for Members Voluntary Liquidations (MVLs), with clients wishing to access the capital they have built up from their trading activities as they seek to retire, move overseas or consider a permanent position as an employee.  With a reduction in the annual capital gains tax allowance on 6 April however we do expect a demand from those wishing to utilise their current allowances before then.

If you are a contractor operating through a limited company and you have plans to retire soon or you are perhaps returning to a permanent staff position, it’s important to review your options to ensure you close down your company in the most efficient way.

Closing your company using a MVL could be the most efficient option for you: 

  • Extract the reserved funds of the business in cash.
  • Pay only 10% tax and also use CGT allowances.
  • The process is very quick - can be completed within weeks.

 Criteria to use an MVL

  • Reserves above £35,000 - after paying all final liabilities.
  • Company has traded over 24 months.
  • Shareholders are directors or employees.
  • Unlikely to carry out a similar trade again via a company within 2 years.
  • You have other drivers for liquidating the company and tax is not the main motivation.

It may be that you do not meet all the criteria above, but an MVL may still be beneficial to you. Some of the tax treatment may change but each shareholder’s outcome will depend on their individual circumstances.

In such an uncertain world, having access to your capital has never been more important. 

Get in touch

We have delivered thousands of MVLs for clients of all sizes so please don't hesitate to get in touch with myself, or a member of our Restructuring team, for a free consultation to understand why you might consider an MVL, and what the process actually looks like.

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