What Is HMRC’s Role In Members Voluntary Liquidation?

Hands of a business woman giving an explanation at a meeting

When a company reaches the end of its useful life or business owners wish to retire, members voluntary liquidation (MVL) allows directors to facilitate the winding up of affairs. This solvent liquidation process allows business assets to be distributed in the most tax-efficient way possible before the company is formally closed. 

For a long time, a number of parties have played a significant role in the MVL process including a licensed insolvency practitioner and HM Revenue & Customs (HMRC). However, HMRC changed its guidance on MVLs at the end of December 2023 and this has significantly changed its role in and bearing on the overall process. 

HMRC’s Historical Role In The MVL Process

Historically, HMRC had a significant role in the MVL timeline as it had to provide clearance to the company liquidators before the liquidation could be finalised. This confirmed that the company in question had no outstanding tax affairs and could therefore proceed with members voluntary liquidation.

While HMRC MVL clearance ensured that only suitable companies were able to proceed with the process, long delays were commonplace and it could often lead to it taking up to 18 months to close a company in this way. This led to strong frustrations among company directors and insolvency practitioners alike and strong and subsequently successful calls for changes to be made to HMRC’s role in the process. 

HMRC’s Current Role In The MVL Process

As of December 2023, HMRC’s role in the MVL process has changed significantly. HMRC no longer provides “pre and/or post tax clearances in MVL cases”. Instead, it is up to the liquidator to do their due diligence and provide reasonable certainty that the tax affairs of the company in question are fully dealt with. 

These changes came into immediate effect and any outstanding cases waiting on HMRC MVL clearance could or can proceed on the judgement of the nominated insolvency practitioner. HMRC will not be providing clearance letters for outstanding requests.

What Does This Mean For Businesses?

With the relationship between HMRC and members voluntary liquidation changing so significantly, the overall MVL process has evolved for businesses. Providing the solvent company that wishes to wind up in this way has its tax affairs in order, it is generally expected that members voluntary liquidations can be completed much more quickly than before. 

Company directors should also expect to work more closely with the Insolvency Practitioner and cooperate as they collect the evidence needed to conclude that tax affairs are in order. Once this information has been obtained and verified, assets can be distributed to shareholders and the winding up process will be able to commence.

Should you require any further information about HMRC’s role in members voluntary liquidation or wish to begin the process, don’t hesitate to get in touch with the team at My Liquidation. Our licensed insolvency practitioners have a track record in helping companies to move through the MVL process promptly and effectively and can offer you advice and costs tailored to your company and needs.

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