Members Voluntary Liquidation (MVL)

A Members Voluntary Liquidation, or MVL, is the formal way to close a solvent company, one that can pay all its debts, where there is retained profit to distribute to shareholders. It is different from the other liquidation routes because it is used by healthy companies, not insolvent ones, typically when a director is retiring, the business has served its purpose, or a contractor is moving to permanent employment. The attraction is tax efficiency: distributing the company's reserves through an MVL means the funds are usually treated as capital rather than income, which can mean a lower tax rate and access to Business Asset Disposal Relief for those who qualify. An MVL must be carried out by a Licensed Insolvency Practitioner, and the directors must swear a declaration of solvency confirming the company can pay its debts within twelve months. If the company is not solvent, an MVL is not available and a Creditors Voluntary Liquidation is the correct route instead. Insolvency Service; gov.uk

Key facts

For: Solvent companies with retained profit to distribute
Tax: Reserves usually treated as capital; possible Business Asset Disposal Relief
Requires: A Licensed Insolvency Practitioner and a declaration of solvency
If insolvent: An MVL is not available; use a CVL instead

Solvent only

The dividing line is solvency. If the company can pay all its debts within twelve months and has reserves to distribute, an MVL is often the most tax-efficient close. If it cannot, the correct route is a Creditors Voluntary Liquidation. Check with the insolvency tests if you are unsure.

Common questions

Is an MVL worth it?

For a solvent company with significant retained profit, an MVL is often more tax-efficient than a strike off, because distributions are usually taxed as capital. The savings need to outweigh the practitioner cost, so it suits larger reserves.

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Members Voluntary Liquidation (MVL). A Members Voluntary Liquidation, or MVL, is the formal way to close a solvent company, one that can pay all its debts, where there is retained profit to distribute to shareholders. It is different from the other liquidation routes because it is used by healthy companies, not insolvent ones, typically when a director is retiring, the business has served its purpose, or a contractor is moving to permanent employment. The attraction is tax efficiency: distributing the company's reserves through an MVL means the funds are usually treated as capital rather than income, which can mean a lower tax rate and access to Business Asset Disposal Relief for those who qualify. An MVL must be carried out by a Licensed Insolvency Practitioner, and the directors must swear a declaration of solvency confirming the company can pay its debts within twelve months. If the company is not solvent, an MVL is not available and a Creditors Voluntary Liquidation is the correct route instead.

Speak to a Licensed Insolvency Practitioner

Tell us briefly what is happening and we will arrange a free, confidential, no obligation call with a Licensed Insolvency Practitioner. The earlier you get advice, the more options you usually have.

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