The landscape for solvent company exits has changed. Here’s how you and your clients can plan ahead to secure the best outcomes.
In April 2025, the changes announced in Labour’s first Budget took effect, reshaping the tax advantages associated with Members’ Voluntary Liquidations (MVLs). For directors looking to extract retained profits tax-efficiently, and for accountants advising them, the game has changed—but the opportunity has not disappeared.
With the Business Asset Disposal Relief (BADR) rate rising from 10% to 14% for disposals made on or after 6 April 2025, and a further increase to 18% scheduled for April 2026, early planning has become more important than ever. If you or your client is considering winding up a solvent company in the next year or two, now is the time to take stock and prepare.
This blog will provide a practical guide to preparing a business for an MVL in this new environment, along with useful tips for accountants supporting clients through the process.
A Quick Refresher: What is an MVL?
A Members’ Voluntary Liquidation is a formal, structured process used to close down a solvent company and distribute its assets to shareholders. It’s typically chosen when a business has served its purpose—often when the owner is retiring, relocating, or shifting to a new venture.
Because distributions in an MVL are classed as capital rather than income, they are subject to Capital Gains Tax (CGT) rather than income tax, making them significantly more tax-efficient—particularly for companies with retained profits above £25,000.
To access this route, the directors must make a statutory declaration of solvency, confirming that the company can pay its debts in full (including interest and contingent liabilities) within 12 months of liquidation commencing.
What’s Changed Since April 2025?
Until 5 April 2025, shareholders benefiting from BADR (formerly Entrepreneurs’ Relief) paid just 10% CGT on qualifying gains. This generous rate has now increased to 14%, and the April 2026 rate of 18% is already on the horizon.
The tax relief is still available—but it’s getting progressively less valuable.
Let’s put that in context:
- A shareholder receiving £500,000 through an MVL before 6 April 2025 would have paid £50,000 in CGT (at 10%).
- From April 2025, that tax bill becomes £70,000 (at 14%).
- From April 2026, it will rise to £90,000 (at 18%).
That’s an increase of £40,000 in just over one year.
For many business owners, those figures make a compelling case for early action.
The Importance of Long-Term Planning
The days of leaving the decision to the last minute are over. If a director is even thinking about closing their company within the next 12–18 months, it’s worth starting the conversation now.
Planning ahead allows time to:
- Review liabilities, including potential tax or legal exposures
- Prepare accurate, up-to-date financial records
- Ensure that all trading and contractual obligations are completed
- Allow for the declaration of final dividends or payroll
- Resolve any shareholder disputes or outstanding HMRC issues
Good planning also reduces the risk of delays once the MVL process starts—something that can prove costly if it means missing the April 2026 deadline for the next rate change.
Tip 1: Start with a Strategic Review
Before anything else, accountants should encourage clients to ask a simple question:
“What do I want from the next stage of my life or business?”
The answer might be:
- Retirement
- Launching a new venture
- Moving abroad
- Simplifying their affairs
- Removing dormant companies from a group
An MVL isn’t always the right fit. But if the company is solvent and holds significant retained profits or assets, it is often the most tax-efficient way to exit.
Understanding the client’s motivations will help you determine not only if an MVL is appropriate—but also when.
Tip 2: Begin Preparing for Solvency Early
To initiate an MVL, the directors must swear a statutory declaration of solvency. This isn’t just a formality—it’s a legal commitment. If it later turns out to be incorrect, directors can face personal liability.
Before approaching an insolvency practitioner, help your clients to review:
- Bank balances and cashflow: Can they meet all liabilities, including future tax and professional fees?
- Contingent liabilities: Are there warranties, guarantees, leases, or potential claims?
- HMRC liabilities: Is everything up to date—corporation tax, VAT, PAYE?
- Outstanding loans or debts: Are all creditors accounted for, including directors and connected parties?
Where there’s uncertainty, it may be necessary to delay the MVL or make adjustments first. For example, clearing debt, closing down contracts, or resolving HMRC enquiries.
Tip 3: Time the MVL Carefully
If the goal is to access BADR at the current rate, timing is everything.
The tax point for CGT purposes is generally the date of distribution. So even if the liquidation has started, if the distribution doesn’t occur before the next rate hike, the higher tax rate will apply.
That’s why it’s essential to:
- Act early: The MVL process takes time. Don’t assume it can be completed in a matter of days.
- Prepare the financials: Have management accounts and balance sheets ready.
- Engage a licenced insolvency practitioner promptly. They’ll guide the timeline and ensure legal compliance, while coordinating the distribution process efficiently.
Tip 4: Clean Up the Company Beforehand
An MVL is not just about tax savings—it’s also a process of tying up loose ends. The smoother the company’s affairs, the quicker and more cost-effective the MVL will be.
Help your client to:
- Cease trading activities and close down ongoing contracts
- Sell or transfer physical assets such as vehicles, stock or equipment
- Repay directors’ loans or other intra-company balances
- Close down business premises and terminate leases
- Cancel subscriptions, licences, insurance policies, and utilities
It may also be worth declaring any final payroll or dividend payments prior to liquidation, subject to your advice on timing and tax implications.
Tip 5: Collaborate with an Insolvency Practitioner
Although accountants are essential to MVL planning, a licenced insolvency practitioner (IP) is legally required to conduct the MVL itself.
The earlier you bring an IP into the conversation, the smoother the process will be. A good IP will:
- Review the solvency position
- Guide directors through the statutory process
- Draft and file required documents
- Deal with Companies House and – unless the existing accountants are able to – deal with HMRC
- Handle final distributions
At Midlands Business Recovery, we see our role as a trusted partner to both you and your client. We don’t just tick boxes—we actively guide and support throughout, giving you peace of mind and saving your client time and stress.
When Is Striking Off a Better Option?
Not every solvent company needs to go through an MVL. If the company’s retained profits are below £25,000 and the affairs are simple, a voluntary strike-off will probably be more cost-effective.
However, strike-off carries some limitations:
- HMRC or creditors can object, delaying the process
- Distributions are treated as income if they exceed £25,000
- There is less legal certainty compared to an MVL
Your role as accountant is vital in helping clients weigh these options. A straightforward, low-value company with no risks may suit strike-off. But where capital gains treatment is desirable, or liabilities exist, an MVL is usually the safer and more beneficial route.
Summary: What Should Accountants and their Clients Do Now?
If your client is likely to close their company within the next 12–24 months, now is the time to act.
Here’s your practical checklist:
✅ Discuss long-term plans with the client
✅ Assess the company’s solvency position
✅ Review contingent and outstanding liabilities
✅ Organise financial records and ensure tax compliance
✅ Cease trading and clean up the balance sheet
✅ Engage with an insolvency practitioner early
✅ Aim to distribute profits before the April 2026 BADR increase…
With a proactive, well-structured approach, your client can still benefit from substantial tax savings—even under the new rates.
Need help? Let’s work together
At Midlands Business Recovery, we collaborate with accountants across the UK to provide efficient, compliant, and cost-effective MVL services. Whether you need a quick eligibility review or full support through the liquidation process, we’re here to help.
☎️ Call Paul Brindley on 07813 102014
📧 Email: paul@midlandsbusinessrecovery.co.uk
Let’s make the next 12 months count—for your clients, and for your practice.