These changes will directly affect the tax reliefs available to clients seeking to liquidate their solvent companies using an MVL.

We’ve created this quick guide so you can provide proactive guidance.
A recap of “What is a Members Voluntary Liquidation (MVL)?”
An MVL is a process designed for solvent companies, allowing directors to liquidate their company and distribute the profits to shareholders. Unlike liquidations triggered by insolvency, an MVL is only available to directors confident in the company’s ability to meet its financial obligations.
Through an MVL, all outstanding debts must be fully settled before any distributions are made. Assets are then distributed as capital, offering shareholders potentially significant tax benefits.
The first step in the MVL process involves engaging a licensed insolvency practitioner (IP) who can assess the company’s suitability for an MVL and guide clients through the process. Their expertise ensures legal compliance and a smooth execution of the liquidation.
The current advantages of an MVL
One of the primary reasons your clients might choose an MVL is its financial benefits: Capital Gains Tax (CGT)
Currently, distributions through an MVL are treated as capital rather than income, enabling shareholders to pay Capital Gains Tax. This is a significant advantage since CGT rates are often far lower than Income Tax rates.
Business Asset Disposal Relief (BADR)
Most clients qualify for Business Asset Disposal Relief (formerly Entrepreneurs’ Relief), which reduces CGT on qualifying assets to 10%. This represents substantial savings compared to standard tax rates on dividend income.
An easy, compliant process
The MVL process is handled by a licensed insolvency practitioner, ensuring legal compliance and reducing the risk of disputes with creditors or HMRC. By collaborating with the IP, you can provide seamless support to your clients.
For shareholders with significant retained profits, these advantages make an MVL an attractive option. A well-planned liquidation allows your clients to optimise their tax position while adhering to all regulatory requirements.
Upcoming MVL tax changes
From April 2025, changes to MVL-related tax reliefs will reduce the financial benefits of solvent liquidations. Specifically, the key adjustment involves higher rates for Business Asset Disposal Relief (BADR).
- Current rate: Gains eligible for BADR are currently taxed at 10%.
- April 2025: This rate will increase to 14% for disposals made on or after 6 April 2025.
- April 2026: The rate will rise further to 18%, reducing the overall tax savings significantly.
These changes represent a notable shift in the financial incentives for clients considering an MVL. For directors with plans to liquidate their company, delaying the process could mean missing out on the current, far more favourable tax landscape. By acting now, clients can secure the existing 10% rate and maximise their tax efficiency.
The increase in BADR rates underscores the importance of taking immediate action.
Accountants play a pivotal role in helping clients understand the implications of these changes and implementing a timely strategy.
Is an MVL right for your clients?
If a client’s company holds retained profits or assets exceeding £25,000, an MVL is often the smartest financial option. However, they need to be able to answer ‘yes’ to these questions:
- Can they confirm the company’s ability to pay all debts, including contingent liabilities, within 12 months of starting the MVL process?
- Are they certain that directors can make a statutory declaration of solvency within five weeks of the winding-up resolution?
- Can they certify that the directors have made a full enquiry into the company’s affairs and are confident it can settle all debts?
It’s important to note that if your client proceeds with an MVL without meeting these requirements, it could expose the directors to legal and financial repercussions. For example, if a company is later found to be insolvent during the MVL process, directors could face penalties, including personal liability for any unpaid debts.
However, with your expert guidance and the support of our licensed insolvency practitioners, clients can navigate these steps confidently. Proactive planning ensures that your clients comply with all legal obligations while unlocking significant tax advantages.
Why act now?
The upcoming changes to Business Asset Disposal Relief in April 2025 mark a significant turning point for shareholders considering an MVL. Acting now can help clients avoid higher tax rates and secure a financially advantageous outcome.
As an accountant, your expertise is essential in guiding clients through these changes. By working with us, you can:
- Provide clarity on the MVL process and eligibility requirements.
- Ensure clients maximise their tax savings under the current rules.
- Help clients achieve a smooth, compliant liquidation process.
For many clients, delaying action could mean facing a substantially higher tax bill. With the 2025 deadline approaching, there is a limited window of opportunity to lock in the existing 10% BADR rate. Proactive planning now ensures clients benefit fully from the current tax landscape while avoiding the financial impact of future increases.
How to get your client started
To deliver the best outcomes for your clients, it’s crucial to act swiftly. Collaborating with a licensed insolvency practitioner ensures your clients receive expert support throughout the MVL process. Together, we can help your clients make informed decisions and optimise their financial position.
Contact FA Simms’ licensed insolvency practitioners by calling 01455 555 444 or emailing [email protected] to discuss how we can work together to guide your clients through their MVLs and secure their tax benefits before April 2025.