Many directors reach a point where their company has served its original purpose. You may be preparing for retirement, stepping away from contracting, simplifying a group structure or wishing to extract retained profits in a clean and orderly way. If you are considering a Members Voluntary Liquidation (MVL), the timing of your decision now has a direct impact on how much tax you will pay.
From 6 April 2026, the Capital Gains Tax rate on qualifying Members Voluntary Liquidation distributions will rise from 14 per cent to 18 per cent. For directors with significant retained profits, this difference can be substantial. Because a Members Voluntary Liquidation can take several weeks (or more) to complete, early planning is essential if you want to secure the current rate. In this article, we outline what an MVL involves, how Business Asset Disposal Relief (BADR) works and why acting soon matters.
What is a Members Voluntary Liquidation and why do directors use them?
A Members Voluntary Liquidation is a formal process for closing a solvent company. A Licensed Insolvency Practitioner is appointed to realise the assets, settle any remaining liabilities and distribute the surplus funds to shareholders. Directors choose this route because it provides certainty, finality and a structured end to the life of a company.
Directors often use a Members Voluntary Liquidation when:
- they are retiring
- a company has completed its purpose and has no further use
- a contractor or consultant is moving into employment
- a group is being simplified
- retained profits have built up over time
Where the conditions for BADR are met, distributions are taxed at a lower rate than standard Capital Gains Tax. This is why many directors prefer a Members Voluntary Liquidation rather than taking funds as income.
How does BADR work in a Members Voluntary Liquidation?
To qualify for BADR, shareholders must meet specific conditions. They must have held their shares for at least two years, must be an officer or employee of the company and the company must be a trading entity. The lifetime limit of £1,000,000 per individual remains unchanged.
When these conditions are met, BADR allows shareholders to benefit from the lower Capital Gains Tax rate that applies to qualifying Members Voluntary Liquidation distributions.
How much tax could you save by completing a Members Voluntary Liquidation before April 2026?
A simple illustration* shows the difference clearly.
If a director has retained profits of £500,000 and qualifies for BADR:
- At the current 14 per cent rate, the tax would be £70,000
- At the 18 per cent rate from April 2026, the tax would be £90,000
This is a difference of £20,000. For companies with higher retained profits – up to the lifetime limit of £1,000,000 per individual – the saving is higher. This is why timing matters right now for any director considering a Members Voluntary Liquidation.
(*Please note, this is only an illustration of a possible outcome and should not be taken as professional advice or a guarantee of such a return. Each MVL is different and the outcome depends on the circumstances of each MVL.)
Why does timing matter for a Members Voluntary Liquidation?
To benefit from the 14 per cent rate, the first distribution must be made before 5 April 2026**. The Members Voluntary Liquidation process involves statutory steps, including the declaration of solvency, the appointment of the Insolvency Practitioner and the realisation of assets. These steps take time, which is why directors who are considering an MVL should begin the process well in advance – several weeks at least.
(**A distribution doesn’t always qualify for this CGT rate – our Insolvency Practitioners will confirm following scrutiny of the figures)
What do some of our Members Voluntary Liquidation case studies show?
Antony Batty and Company has completed hundreds of Members Voluntary Liquidations since our formation in 1997. A selection from our website illustrates the range of situations in which directors choose an MVL and the steady, structured approach we bring to each appointment.
- Circus Minds Limited. The former director praised the smooth and efficient handling of the MVL, which allowed shareholders to extract retained profits and claim BADR.
- Marine 123. The retiring director was pleased with the well organised process, with the winding up completed in less than eleven months and a cash distribution made to the sole shareholder of both companies.
- APT.64 Limited. The sole shareholder appreciated the clear guidance and steady support throughout the MVL, with the final distribution made across four payments.
- Deron Developments Limited. The director valued the clear communication and timely distributions throughout the MVL, which allowed the company to be wound up in an orderly and efficient manner.
- Join In Trust Limited. The trustees highlighted the professional and supportive approach taken during the MVL, ensuring that the closure was handled with care and that all statutory requirements were met.
These examples reflect the structured and experienced approach we bring to every Members Voluntary Liquidation.
How can Antony Batty and Company help with a Members Voluntary Liquidation?
At Antony Batty and Company, our team guides directors through each stage of the Members Voluntary Liquidation process with clarity and care. We ensure that statutory requirements are met, that the timetable is managed efficiently and that distributions are made as promptly as possible.
If you are considering closing your solvent company and wish to take advantage of the current MVL Capital Gains Tax rate, we recommend starting the process well before the April 5th, 2026, deadline. Taking early action can make a meaningful financial difference to the outcome. Contact us now for a free of charge initial discussion.
Frequently asked questions about Members Voluntary Liquidations
How long does a Members Voluntary Liquidation usually take?
The first distribution can often be made within a few weeks, provided the company’s records and assets are in good order. The full liquidation takes longer, as statutory steps must be completed before the company can be dissolved.
Do all shareholders need to agree to a Members Voluntary Liquidation?
Yes. An MVL requires the directors to sign a declaration of solvency and the shareholders to pass the necessary resolutions. In most cases, this is straightforward.
Can a company with modest retained profits still use an MVL?
Yes. An MVL is suitable for companies of all sizes, provided the company is solvent and able to pay all liabilities in full.
What happens if a liability is discovered after the MVL has started?
The Insolvency Practitioner will deal with it as part of the process. This is one of the reasons why directors value the certainty and structure of a Members Voluntary Liquidation.
Is an MVL suitable if a director is moving into employment?
Yes. Many contractors and consultants use an MVL when they move into permanent roles in other companies and no longer need their own limited company.
Can multiple shareholders each qualify for BADR?
Yes. Each shareholder is assessed individually. Provided each meets the BADR conditions detailed above, they can benefit from the lower Capital Gains Tax rate.
