PHILIP A BECK
Chartered Accountant
Licensed Insolvency Practitioner

41 Kingston Street, Cambridge CB1 2NU
Tel: 0800 1953605 (Free call) or 01223 367022
Fax: 0844 5048737
email: pbeck@ntlworld.com

IVA

Members Voluntary Liquidation - can this be done informally ?

The directors may be wondering whether they can wind up a company themselves without the appointment of a liquidator, and the answer to that is, yes they can, however from 1 March 2012 the tax benefit of doing so is subject to a limit of 25,000 total sum distributed in anticipation of the dissolution of the company.

Normally, if a company distributes monies to its shareholders outside of a liquidation, the monies would be treated as dividends in the hands of the shareholders, and be subject to income tax, whereas distributions made during the course of a liquidation are treated as capital receipts instead upon which capital gains tax may be payable.  Usually this would be beneficial for the shareholders.  This is explained in more detail here . H M Revenue & Customs used to operate a concession scheme known as ESC C16 whereby they would allow a company to apply for an "informal winding-up" without passing a resolution for liquidation or appointing a liquidator, and then distribute its remaining funds as capital receipts to the shareholders.  This effectively allowed shareholders to enjoy the same treatment informally as would have happened had things gone strictly by the book.

From 1 March 2012 ESC C16 has now been ended and replaced by legislation, which is explained in more detail here .

The effect of the new legislation is that for shareholders who are higher rate taxpayers, it is likely that for a company with more than 25,000 to distribute at the end of its life, the tax benefit to shareholders of placing the company into formal Members' Voluntary Liquidation will exceed the cost of the liquidation.

Philip Beck is a Licensed Insolvency Practitioner operating since 1996 with substantial experience in undertaking cost-effective liquidations, both solvent and insolvent.  A members' voluntary liquidation can be undertaken for a fee as low as 2,000 + disbursements of a few hundred pounds.  Multiple liquidations of group companies with common directors and shareholders can be undertaken for a fee from 1,500 per company + disbursements.

Back to Members Voluntary Liquidation Home Page

Members Voluntary Liquidation Questions and answers.

What are the tax advantages of a Members Voluntary liquidation ?

What is the procedure for putting a company into Members Voluntary liquidation ?

Can this be done informally without the expense of liquidation ?

What is Extra-Statutory Concession C16 (ESC C16) ?

What are Undistributable Reserves ?  What can be done about them ?

What is Bona Vacantia ?

How much does it cost to put the company into members voluntary liquidation ?

What is a Section 110 Reconstruction and how can it achieve a tax-efficient disposal of part of a company's business ?

What happens if creditors' claims arise during the liquidation ?

What happens at the end of the liquidation ? Can the company ever be restored to the register if necessary ?

Please note that this site deals only with company and tax law in the United Kingdom of Great Britain and Northern Ireland.   It is not applicable to other jurisdictions.

Copyright © Philip Beck Insolvency Practitioner, Cambridge UK, 2010. Members Voluntary Liquidations (MVL)s explained.

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