MVL – Getting the timing right for you

Donald McNaught

Donald McNaught

Restructuring Partner

01 February 2017

Many clients we deal with have not considered the timing of their MVL to any great extent but the timing of the MVL can have significant bearing on the tax efficiency of the process.

For example, you may wish to overlap distributions between different tax years to take advantage of different years’ annual allowances.

You may, however, have different personal tax circumstances in different tax years meaning it would be advantageous to receive a distribution in one tax year over another. Perhaps you have already utilised your annual capital gains allowance through the realisation of other assets.

Anti-avoidance rules preclude shareholders from beneficial tax treatment if tax is the main driver for liquidation. Most of our clients, however, liquidate their companies for other reasons. Tax is usually a significant consideration of course.

If shareholders have a pressing need to extract funds for a personal issue such as a house purchase, it is important to plan ahead and make sure that it is not done under the time pressure which can often arise when a client needs a distribution within 24 hours. In more than one occasion we have managed to achieve that turnaround but we wouldn’t recommend you take the risk.

If you want to discuss the best timing for your MVL, get in touch with a member of our Restructuring team now.