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 are assets to distribute to shareholders. It must be carried out by a Licensed Insolvency Practitioner, and the directors must swear a declaration of solvency, in person in front of a solicitor or commissioner for oaths, confirming the company can pay its debts within twelve months. Insolvency Service; gov.uk
- For
- Solvent companies with assets to distribute
- Tax
- Cash and other assets are distributed as capital; possible Business Asset Disposal Relief (take separate tax advice)
- Typical cost
- From around £4,000 plus VAT, paid from the company's assets (in Jessica Barker's experience as an insolvency practitioner; there is no published fee scale)
- Requires
- A Licensed Insolvency Practitioner and a declaration of solvency
- If insolvent
- An MVL is not available for an insolvent company; use a CVL instead
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At a glance
| Route | For | Why |
|---|---|---|
| MVL | A solvent company with significant cash or other assets to distribute | Distributions usually treated as capital; possible Business Asset Disposal Relief |
| Strike off (DS01) | A solvent company with little or no retained profit | The cheapest close once its affairs are settled |
| CVL | A company that cannot pay its debts | The correct route when an MVL is not available |
Why companies use an MVL
An MVL 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 possible tax efficiency: distributing the company's assets to shareholders through an MVL means the funds are usually treated as a capital distribution rather than dividends, which can mean a lower tax rate and access to Business Asset Disposal Relief for those who qualify. The practitioner handling the MVL is not acting as your tax adviser, so take separate tax advice.
There is an anti-avoidance rule. If you close a solvent company through an MVL and then carry on a similar business within two years, HMRC can tax the distribution as income instead of capital (Income Tax (Trading and Other Income) Act 2005, s396B).
Solvent only
The dividing line is solvency. If the company can pay all its debts within twelve months, an MVL is often the most tax-efficient close. If it cannot, an MVL is not available and the correct route is a Creditors' Voluntary Liquidation. Check with the insolvency tests if you are unsure.
Related data
Our UK company insolvency tracker: The latest insolvency figures, for context on the insolvent routes an MVL is not. Every page on our data hub names its official source.
Where to go from here
- If you decide to speak to a Licensed Insolvency Practitioner, choose your own: our practitioner directory lists every practitioner on the official Insolvency Service register, and how to choose an insolvency practitioner explains what to ask. Always confirm their entry on the official register before you instruct anyone.
Common questions
Is an MVL worth it?
For a solvent company, 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. A good practitioner should tell you if the saving is too small to be worth the cost.
Can a members' voluntary liquidation be reversed?
An MVL is generally not reversed, because it is used to close a solvent company and distribute its assets. If, after it begins, the company turns out to be unable to pay its debts within the twelve months declared, the liquidator must convert it into a Creditors' Voluntary Liquidation instead.
How much does a members' voluntary liquidation cost?
An MVL must be handled by a Licensed Insolvency Practitioner, so it costs more than a simple strike off. The practitioner sets the fee based on the work involved: in Jessica Barker's experience as an insolvency practitioner, from around £4,000 plus VAT. However, there is usually an overall cost benefit where the company has enough to distribute for the tax saving to outweigh the fee; a practitioner will quote before you commit.
MVL or strike off, which should I use?
For a solvent company with little or no retained profit, a strike off via DS01 is the cheapest close. For a solvent company holding significant reserves, an MVL is usually more tax-efficient because distributions are treated as capital. The size of the reserves is what tips the decision. There is also a statutory figure to know about. Under the Corporation Tax Act 2010, section 1030A, a distribution made before a strike off is not treated as a distribution for the Corporation Tax Acts if its conditions are met, and one of them is that the amount, or the total of such distributions, “does not exceed £25,000”. How that applies to your company is a question for a tax adviser.