A Members’ Voluntary Liquidation (MVL) is a company liquidation designed for solvent companies with significant profits. It’s a formal process that means all liabilities are settled in an orderly way and any remaining value is distributed to shareholders, before the company is formally dissolved.
The key benefit is how those distributions are treated for tax purposes. Instead of being taxed as income they can be treated as capital, which can significantly reduce the overall tax bill (if all conditions are met).
Just as importantly, an MVL provides a structured and compliant way to bring a company to an end, with everything dealt with properly through a licensed insolvency practitioner.
When can an MVL be used?
An MVL is most commonly used where the company is healthy and has retained profits of over £25,000, but is no longer needed. Typical scenarios include:
- A contractor finishing a period of self-employment and moving into permanent work
- A business created for a specific project that has now completed
- A director retiring or stepping back with no plans to sell or pass the company on
- Group simplification, where surplus companies are being closed
- A company that has accumulated profits rather than distributing them year by year
What do you need to start an MVL?
Before the process can begin directors must confirm that the company can pay all its liabilities, including tax and any contingent debts, within 12 months.
This confirmation is made through a statutory declaration of solvency. Directors are expected to have a clear and accurate understanding of:
- Outstanding tax liabilities
- Supplier and professional fees
- Payroll obligations
- Any future or contingent costs
When the company’s position is clear and well documented, the MVL process tends to run smoothly. Creditors are settled in full and shareholders can then receive distributions with confidence.
How is an MVL tax efficient?
One of the main reasons directors choose an MVL is the tax treatment of distributions. Funds distributed in an MVL are treated as capital rather than income. Where shareholders qualify for Business Asset Disposal Relief (BADR), this can result in a significantly lower rate of Capital Gains Tax than would apply to dividends.
BADR rates are changing in April 2026
Gains eligible for BADR are currently taxed at 14%. From April 2026, this will increase to 18%. Delaying a decision can materially affect how much shareholders ultimately keep. Speak to our experts to get started on your MVL today.
The other benefits of an MVL
In many cases, the official receiver manages the liquidation from start to finish, particularly where there Beyond tax, many directors value the certainty an MVL provides. This includes:
- Compliantly closing the company using a regulated professional
- Removing ongoing filing and compliance obligations
- Ensuring HMRC and other creditors are dealt with properly
- Providing a clear end date, rather than an open-ended wind-down
For directors who want to move on to their next chapter, that sense of completion is often just as important as the financial outcome.
How the MVL process usually works
Once an MVL is agreed as the right route, the steps are generally:
- Reviewing the company’s solvency position
- Preparing the statutory declaration of solvency
- Appointing a licensed insolvency practitioner
- Paying creditors in full
- Distributing remaining funds to shareholders
- Dissolving the company
When financial information is up to date, much of this can progress quickly, with distributions often made shortly after the liquidator is appointed.
Key takeaways
- An MVL is designed for solvent companies that are ready to close
- It allows retained profits to be distributed as capital
- Solvency must be clear and properly confirmed
- Tax efficiency is a major advantage, especially where BADR applies
- An MVL provides a clean, structured and final exit
Get advice on whether an MVL is the right exit for you
If your company has stopped trading, holds retained profits above £25,000 and you’re considering closing it, a short review is usually enough to confirm whether an MVL is appropriate.
A short, upfront review with a qualified insolvency practitioner can confirm whether an MVL is appropriate, how distributions would be treated for tax purposes and what the process would look like in practice. It also gives you clarity on costs, timescales and any points that need to be addressed before moving ahead.
Get in touch with us today to find out what options are available and whether an MVL can support your wider plans.
