A guide, not advice. This explains how things generally work. A licensed insolvency practitioner will tell you what applies to your company or to you.
MVL vs Strike-Off: Which Is Right for a Solvent Company?
If you have a solvent company you want to close, you generally have two options: a Members' Voluntary Liquidation (MVL) or a straightforward strike-off (dissolution). Both close the company, but they have very different tax consequences - and choosing the wrong one can be costly.
The £25,000 Rule
The deciding factor is usually the amount of money in the company:
- Under £25,000 - A simple strike-off is usually sufficient. Any distribution to shareholders is automatically treated as capital (potentially taxed at lower rates), without needing an MVL.
- £25,000 or more - You generally need an MVL to secure capital treatment. If you strike off a company with £25,000+ and pay it out as dividends, HMRC can tax the distribution as income (dividend rates), which is usually far more expensive.
MVL: When It's Worth It
An MVL makes sense when:
- The company has £25,000 or more in reserves
- You want distributions taxed as capital, qualifying for Business Asset Disposal Relief at 10%
- The tax saving significantly outweighs the MVL fees (typically £2,000 to £4,000 + VAT)
For a company with £100,000 in reserves, the difference between capital and dividend treatment can be tens of thousands of pounds - far more than the MVL cost.
Strike-Off: When It's Enough
A strike-off is appropriate when:
- The company has under £25,000 in reserves
- The company has ceased trading for at least three months
- There are no outstanding debts or disputes
- You want a simple, low-cost closure
What Both Require
- The company must have ceased trading
- All creditors must be paid or provided for
- The company must be genuinely solvent
- Proper notice must be given
Speak to a Licensed IP
Choosing the wrong route can trigger a large, unexpected tax bill. Our Manchester-based practitioners will assess your company's reserves and tell you honestly whether an MVL or a strike-off is right - and what it will cost and save.