Members’ Voluntary Liquidation (MVL) for contractors
If you’re a contractor, the most urgent reason for you to seek a Members’ Voluntary Liquidation (MVL) is IR35.
IR35 refers to the rules around off-payroll working and deciding whether a contractor is employed or independent. This has huge tax implications.
As the Government’s own website explains: ‘From April 2021, the rules for engaging individuals through personal service companies are changing. The responsibility for determining whether the off-payroll working rules apply will move to the organisation receiving an individual’s services.”
Before employers classify contractors as employed staff to simplify their own tax affairs, contractors who have a personal service company (PSC) to help minimise their tax bills, are ‘winding up’ that company.
The advantages of doing this through an MVL are:
It’s a tax efficient way of extracting cash from the business.
You might qualify for Business Asset Disposal Relief, if you own at least 5% of the shares for at least one year before your MVL.
Read our five-step quick guide for further details on completing your MVL.