One of the main advantages of liquidating a solvent company is the potential tax benefits. Any dividends to shareholders or directors, i.e. realised funds from the sale of assets or ‘in specie’ distribution, are considered capital distribution, instead of income distribution. Therefore, they are subject to Capital Gains Tax (CGT), which is a lower percentage of capital than the percentage of tax due on an income distribution.
The added Members Voluntary Liquidation tax advantage is Business Asset Disposal Relief, or BADR. Formerly known as Entrepreneur’s Relief, BADR reduces the amount of CGT paid on qualifying capital gains – i.e. monies received in respect of the sale of a closed business’s assets or in specie distribution – and the current level is 10%. However, there are certain criteria to be met in order to qualify for this tax benefit.
Are you looking to close a solvent company and want to enter a Members Voluntary Liquidation? Have you taken our survey but need more information? Our highly skilled, professional team of insolvency practitioners are on hand to help you with your MVL. Call us today.