MEMBER’S VOLUNTARY LIQUIDATIONS, ARE YOU PREPARED?

Author

Richard Cole Director

KBL Advisory

07862 237741

0161 637 8100 richard

@kbl-advisory.com

There has been much speculation that the Chancellor Jeremy Hunt will look to recoup monies spent supporting companies and individuals during the pandemic via tax increases. Further to this, it has been widely reported Mr Hunt is planning a much-reduced spring budget with ‘no immediate tax cuts’, stating that boosting growth, bringing down inflation and reducing national debt were the government’s top priorities and once business and public confidence has been restored, only then could tax reductions be considered. This comment reaffirmed to many the likelihood of tax increases elsewhere.

With the Spring budget approaching, Capital Gains Tax looks to be in the crosshairs given that it is a soft target, politically, with some predicting that the top rate could more than double from 20% to 45%. There are also murmurings that Business Asset Disposal Relief could be narrowed such that it can only be utilised by retiring directors. Unfavourable changes in CGT rates and/or annual allowances (a reduction of the latter already due to take effect from April 2023) are likely to be implemented and could have significant implications for business owners who maybe retiring soon or looking to close a company.

Members' Voluntary Liquidations (MVL) are a tax efficient way of returning funds to shareholders once a Company comes to the end of its useful life. We always tend to see an increase in enquiries for Member’s Voluntary Liquidations in the lead into a budget announcement due to concerns of reforms to Capital Gains Tax and Business Asset Disposal Relief (where tax rates are still currently 10%) – a key benefit of an MVL/Solvent Liquidation process.

Time is Running Out..

The Chancellor is under pressure to generate income from somewhere when he delivers his next budget, and we anticipate a surge in MVLs before reforms come into force. Early advice and planning are crucial for any business owner considering an MVL. The process requires planning prior to liquidation to deal with potential issues, ensuring a smooth distribution of funds to shareholders.

Clients that would benefit from an MVL.

- A contractor closing a ‘personal service company’ to take a full-time employed role

- A company owner looking to retire or simply wanting to close down

- Any dormant company that no longer serves a purpose

- Special Purchase Vehicles where the project is complete www.kbl-advisory.com

Whilst many MVLs can be straightforward, there can be complicating factors. Therefore, it is important that your clients take specialist advice prior to beginning the process.

If you have any clients who would benefit from our advice – they haven’t got long, so please do not hesitate to get in touch.

Enjoying this article, but need more advice on any of the topics covered?

To discuss how ETC can help with your tax questions call the team on 0161 711 1320 or email enquiries@etctax.co.uk

Editor’s comment: Richard has highlighted an important and topical issue. As the UK faces its highest tax burden in over 70 years careful planning and careful consideration of the tax consequences of any planning such as this are critical. This is an area that ETC Tax is well positioned to advise upon www.etctax.co.uk/companies/buying-selling-company

We are an independent insolvency practitioner supporting local accountants and their clients with restructuring and insolvency advice, when they need it most.

Our role as an insolvency practitioner involves supporting and advising businesses and their directors during their most difficult times.

For those business owners and directors faced with financial challenge, having an adviser who will treat you with respect, compassion and understand the situation that you find yourself in is crucial.

Please get in touch should you wish to speak with one of our experienced team.