With the recent announcements by The Chancellor of the Exchequer, Rachel Reeves, everyone is poised for sweeping tax rises and changes in the Autumn Budget due to be announced on 30 October 2024. The budget is expected to completely redefine the current advantages of Members Voluntary Liquidation (MVL).
You may have heard the term MVL, but do most people know what it is, let alone the advantages?
What is MVL?
In general terms an MVL is a formal liquidation process for solvent limited companies that allows for more efficient tax planning and to maximise tax savings. The whole process is designed to release cash quickly while reducing the exposure to tax.
The way this is done is that cash taken from the company during an MVL is treated as capital rather than income, meaning that the amount is subject to Capital Gains Tax (CGT) rather than income tax. The benefit of this is that CGT is calculated at a much lower rate. On top of this you may qualify for Business Asset Disposal Relief (BADR) to further reduce your exposure to tax.
Possible changes
While there has been no official confirmation it is expected that both advantages will be affected by the Autumn Budget. It is expected that the capital gains tax rate, which is currently at 10% for the basic rate and 20% for higher rate, could be increased along with potentially the removal or reduction of the Annual Exempt Amount. The BADR, which is a relief scheme that can reduce capital gains tax to 10%, could also be scrapped. If these changes occur the key tax advantages that can currently be utilised will be eliminated.
Advice
If you are looking to take advantage of the benefits of an MVL we would recommend not delaying and get the process started. Should you want to do an MVL, or just want more advice on the topic, please get in contact with us.
