Our One80 experts were introduced to the client who owned two successful interconnected property development companies. Both were long standing family businesses shared between a father and his two sons which had been trading since 1953. The directors weren’t keen to continue to run the business and sought advice from our specialists in respect of the winding down of operations.
It was clear that the company’s finances were in good order and the primary motivation for the instruction was to bring an orderly closure to the company’s affairs. Ultimately, the directors were seeking a liquidation process to which they could use as an exit tool.
Options were considered and a final strategy was discussed between the directors, referrer and One80 experts where it was agreed that both companies would be placed into a Members Voluntary Liquidation (MVL). It was decided that this would be the best option as an MVL is the favoured formal process of bringing a company’s affairs to a close. In addition, it presents an opportunity for the members to potentially receive favourable taxation benefits.
As the company was solvent we immediately looked at realising the assets and instructed a specialist valuer. It was apparent that there was substantial worth in the company’s assets which were valued at £8.8million and by liquidating these down the company would be in a position to pay all of its liabilities. The only liabilities the business held related to HMRC and specifically concerned the final corporation tax and VAT costs.
One80 experts competed the successful MVL of two interconnected companies
It was apparent that there was substantial worth in the company’s assets which were valued at £8.8million and by liquidating these down the company would be in a position to pay all of its liabilities.
Our clients were impressed with how simple our experts were able to make the process seem given the complexity of the situation. They were also incredibly pleased with the outcome which was favourable to all parties involved. By going through an MVL process, the members benefited from Entrepreneurs’ Relief (now known as Business Asset Disposal Relief) taxable at 10%, rather than being taxed on income as a higher rate tax payer. This meant that they were able to save £3.9million of tax whilst HMRC was paid in full (100p in the £).