Are you looking to retire, close your company down and extract the surplus funds as a dividend against your shares? This is where tax planning and a formal winding up of the business affairs via a members voluntary liquidation (“MVL”) come into the equation.
A MVL is a solvent winding up that, given certain criteria, enables the shareholders to claim business asset disposable relief and reduce the capital gains tax to (currently) 14%. This is to increase to 18% in April 2026. However, there is some uncertainty whether the available capital gains tax rates will remain, given the Autumn statement will be on 26 November 2025 and representations being made by the Government with regards to taxation generally.
Arguably the most fundamental part of a MVL is swearing the declaration of solvency. This includes a statement from the directors whereby they declare all known company creditors shall be paid in full, together with statutory interest within a period not exceeding 12 months.
Where properly pre-planned, by the time you are ready to commence the MVL procedures, all liabilities have already been paid and it is a “Clean” state of affairs, requiring the distribution to shareholders. However, what if you have a potential debt hanging over the company? It is a liability the directors say is not owing, yet it could end up being a court matter and is likely to remain unresolved within the 12-month period. What do you do?
Ordinarily, it would be reasonable to suggest a provision is made against that prospective liability so, if the company lose the argument or reach a settlement, the funds are there to cover the liability. However, the recent High Court decision of Noal SCSP & Ors v Novalpina Capital LLP & Ors [2025] EWHC 1392 suggests if all debts are not paid within the specified 12 months the liquidator should be looking to convert the MVL into an insolvent liquidation. That gives rise to investigations, including whether it was reasonable to swear the declaration of solvency in the first place.
The above decision is subject to appeal, but the key message, here, is plan thoroughly and consider all possible issues before commencing the MVL itself. This is where PBC can assist you when approached at an early stage.
If you need any advice or assistance on any MVL, corporate restructuring or insolvency-related issue, then please contact PBC Business Recovery & Insolvency on 01604 212150 (Northampton), 01908 033150 (Milton Keynes), 01234 989150 (Bedford) or email to enquiries@pbcbusinessrecovery.co.uk. Alternatively, visit www.pbcbusinessrecovery.co.uk for further information.