We are now facing the prospect that Covid 19 is going to affect business for a considerable time to come. At Brailey Hicks we are seeing several companies which are re-evaluating their position and, given the current difficulties, they are taking the decision to close their previously successful businesses and extract the assets in a tax efficient manner.
Often the most tax efficient way of moving the assets and cash from the company to its shareholders is through a solvent liquidation called a members' voluntary liquidation ("MVL"). This is because distributions to shareholders in an MVL are normally taxed as capital proceeds and therefore subject to capital gains tax as opposed to income tax. This means that (subject to certain conditions) entrepreneurs relief can be utilised to bring the capital gains tax rate down to 10%. At Brailey Hicks we have a very efficient process and can arrange for assets and cash to be distributed to shareholders in a very quick timescale.
An alternative to MVL when there is a relatively low level of assets and cash to distribute to shareholders, is to simply dissolve the company. This route can be less costly but it is important to take professional advice to avoid any potentially expensive mistakes.
At Brailey Hicks we always work closely with your accountant to ensure you use the right process for you when you are closing your company. If you are considering closing your business, contact Brailey Hicks for an initial discussion to consider the alternatives available.
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