MVL

MVL

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My Client has significant reserves in their company (£90K) and is pursuing MVL to claim ER. That part is fine. 

Because the entire cash balance will be transferred to the liquidators account, client is concerned about the cash being tied up while the process is completed and is asking if they can take the some/majority of the cash, leaving the rest to be transferred and cover any remaining fees etc.

MVL is not something we have dealt with very often and I was unsure if the the amount they took without the liquidators transferring it to their own account would still be covered under ER? Would this be a problem? They have mentioned that a colleague of theirs performed an MVL and their accountant advised them to do exactly this. 

I can't find anything online that covers this. One article mentioned taking a sum as a directors loan which is then paid off by the capital distribution but I think this requires extra disclosures and may increase the cost. 

My only other thought is that the only other income she receives is a pension of around £20k p.a (we have discussed a slow draw down of dividends already). Could she take a dividend while staying below higher rate taxes and the liquidator can do the rest. 

Thoughts?

Replies (4)

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By johngroganjga
26th Nov 2015 14:24

Doesn't your client just need to talk to the liquidator about how this will be managed, and the timescales?

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By Ruddles
26th Nov 2015 14:32

Agree with John

If there are no significant creditors in the wings, the liquidator will often, subject to an indemnity from the shareholders, be prepared to make an interim distribution. I may be wrong here, but I believe that once the liquidator has been appointed all distributions are treated as capital, so if you want to utilise any of the BRB you will need to take a dividend pre-appointment.

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By Maslins
27th Nov 2015 11:11

Discuss with the liquidator. 

Discuss with the liquidator.  For most it will be possible for your client to take at least some of the cash in advance, to later be cleared by a paper only distribution.

It will keep things simpler (so likely keep fees lower) if it is all left as cash, ie not taken in advance.

As suggested above, on a typical case our sister company MVL Online would (assuming no cash taken before hand) be able to distribute 75% of the funds within about a month of being appointed.  Precise timescale dependent on which bank the company banks with (Barclays/Cater Allen very quick, Lloyds/Natwest very slow, others in the middle).

It will then be quite a bit longer before HMRC clearance is obtained and the balance can be paid out.

With respect to ER, looks like nothing immediately changed following the Autumn statement, but does look like offerings like ours are in the Chancellor's sights.  I would've thought that any changes they did make would only impact liquidations started after that date, as it'd be harsh to change the rules for someone already committed to a certain action.

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By Fotek
27th Nov 2015 16:07

Thanks for your comments. As the liquidator had not been appointed client has decided to take a dividend of around £15k to use up her basic rate tax allowance for the year and let the rest of the funds go through the liquidator. 

@Maslins - MVL Online is actually the company we are currently recommending to our clients and is who she has chosen to use. They bank with HSBC so I guess it will be somewhere in the middle of the usual time-frame. 

Thanks again all. 

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