Introduction:

Umbrella Accountants are working with SFP Corporate Solutions Limited (SFP), as a preferred business partner, to provide a cost effective solution where shareholders are looking to close down their company and extract funds utilising Entrepreneurs Relief.

The SFP Group are a multi award winning mid-tier insolvency practise. SFP work with a significant number of accountants across the UK and are fast becoming a leading name in the MVL market.

The partnership provides a value added service that may be relevant to a significant number of Umbrella Accountants clients.   

Members Voluntary Liquidation (MVL)

MVL’s are a useful tool in the following situation:-

To formally close down a company at the end of its useful life and as a tax efficient way for shareholders to extract funds from a company utilising Entrepreneurs Relief

The MVL procedure is most commonly used by contractors or freelancers, working within a limited company, wishing to minimise their tax liability when a contract has come to a natural end and the limited company has no further useful purpose.

Although reference is made to a liquidation it should be stressed that an MVL is a solvent liquidation and no stigma attaches to the directors. There is also no effect to future trading should the director chose to return to contracting at a later date, so long as the company has been wound up through an MVL for genuine and justifiable reasons.

When is an MVL suitable?

The director / directors should consider the benefit of a solvent liquidation where assets, post settlement of any debts and corporation tax, exceed £25,000. If assets are less than £25,000 a MVL may not be financially beneficial.  

It is always necessary to look at the economics of using an MVL as opposed to other means of extracting cash from a company, e.g. remuneration and dividends.

Irrespective of the above, a key benefit of MVL is in the formal dissolution of the company as opposed to merely “striking off”. With the latter route, any unsatisfied or unknown creditors could petition at a later stage for the company to be restored.

As previously mentioned most MVL’s involve funds of at least £25,000, below which, the costs generally outweigh the financial benefits.

The Process

Prior to commencing an MVL it is necessary for accounts up to cessation to be prepared and final corporation tax PAYE/NIC and VAT returns to be completed and submitted so that all tax liabilities are known.

If practical, all liabilities should be paid prior to liquidation, however these can, if necessary, be paid out of liquidation funds in hand.

All forms and documents necessary to place company into MVL are supplied by SFP, together with a checklist showing the order for completion. SFP are also available to meet with the directors in person or deal with any queries by phone and/or email. In short, SFP offer a full “hand holding” service.

What are the costs of an MVL?

The cost of an MVL are reflective of the assets to be distributed.

Umbrella Accountants would always strongly recommend using a firm they have experience with instead of an unknown practice for the following reasons:-

• You should be cautious against placing your funds with an alternative firm with whom your accountants are unfamiliar as the service you receive cannot be guaranteed
• Once a liquidator is appointed then there has to be complete trust that the liquidation will be handled as expected and, if it is not, then the only redress will probably be instructing lawyers given the directors powers cease. This is expensive and time consuming

When choosing an insolvency practitioner to undertake a solvent liquidation you should seriously consider your accountants advice and appoint a firm with a good track record and a good reputation in the industry.

SFP fees can range from approximately £2,000 to £3,000 plus VAT according to a set scale. However, SFP are always happy to discuss fees on a case by case basis.

All insolvency practitioners will incur additional costs, commonly known as disbursements, these will be bond fees and advertising costs, which tend to average out at approximately £500 plus VAT.

Generally, when dealing with a VAT registered company the VAT element can be recovered for the benefit of the shareholders.

Getting Started

Initially, suggest you speak to Umbrella Accountants to discuss the practicality of an MVL and whether it will be beneficial to you.

If an MVL is the correct and proper option SFP would be pleased to talk you through the process, provide timelines and guidelines and provide a fixed quote.

SFP will also provide you with a Welcome Pack which includes Frequently Asked Questions and a Letter of Engagement.

Thereafter, once appointed SFP will continue to liaise with you and Umbrella Accountant to ensure that the process runs as smoothly as possible.

To find out more information please call Umbrella Accountants on 01625 546 610 www.umbrella.co.uk