Glossary · UK

What is Members' Voluntary Liquidation (MVL)?

A formal process to wind up a solvent company, with distributions to shareholders treated as capital (CGT) rather than income.

Full Definition

An MVL is initiated by the shareholders of a solvent company who have resolved to cease trading. A licensed insolvency practitioner is appointed as liquidator, collects the assets, pays all creditors, and distributes the surplus to shareholders. Distributions are capital receipts for shareholders (subject to CGT, potentially with Business Asset Disposal Relief at 14% from April 2025, reducing to 18% from April 2026) rather than dividends (which would be taxed as income at up to 39.35%). HMRC's Targeted Anti-Avoidance Rule (TAAR) can recharacterise distributions as income if the main purpose of the winding up was to obtain a tax advantage and the shareholder re-engages in similar activities within 2 years.