Members’ Voluntary Liquidation (MVL’s) or solvent liquidations as they are commonly called, have been very common over the last few years. There are a number of reasons for this:
1) A generation of entrepreneurs is reaching a stage in their life where they are looking to retire.
2) A number of special purpose companies, commonly set up to complete a building project have now been completed following the sale of remaining properties (after a period of renting them).
3) A number of people set up limited companies to trade during the recession as jobs were lost, but short term consultancies were available.
In these cases, an MVL is a straightforward and tax efficient manner to bring the Company to a conclusion. The procedure is also attractive due to it being relatively straight forward.
For many years, this process has worked well. But, following the recent restructuring of HMRC, all tax matters relating to insolvencies are handled in offices dependent upon the case type rather than the type of tax involved. This has created particular problems with obtaining tax clearance in MVLs, which is a fundamental requirement to enable the MVL process to be completed.
MVLs have been transferred to Worthing, although I understand there was no proper handover plan or training provision, so the HMRC staff are under pressure and relying upon ‘training on the job’. This department is not giving out specific names or direct line numbers meaning it has been difficult to chase up the relevant individual to bring a case to a conclusion.
I already have a number of examples of cases that are ready to close but are awaiting HMRC clearance and in two cases waiting on pre-appointment refunds.
Whilst my team are keeping the pressure on HMRC to agree final claims and obtain clearance, our regulators also have made it clear that we should not close a case before clearance is received. For example, writing to HMRC to say we are closing unless we hear anything from you, is not acceptable.
In order to help the process, I try to ensure that all steps are taken to reduce this problem. For example, it is important to ensure all VAT, PAYE / NIC, P11D and Corporation tax returns are submitted for the pre-appointment period as soon as possible.
A few years ago I had a case in which the final accounts were completed up to the end of the month, the liquidator being appointed on the 3rd day of the following month. Despite the fact that the 1st and 2nd happened to be a weekend, HMRC insisted that a CT return was submitted for the two day period. This was completed and clearly was a NIL return as no trade had occurred but is an example of the sort of issues that can be dealt with by good planning.
PBC always suggest that if you are considering a solvent liquidation process early advice is taken. I have many examples where this advice has resulted in the Company avoiding many issues in the longer run, which more often than not facilitates a smoother conclusion of the company affairs.
Should you need any assistance on MVLs (or any insolvency-related matter), please feel free to contact the PBC team.