The typical company owner benefiting from our liquidation offering would have the following circumstances:
- A fully utilised basic rate tax band with salary/dividends (for the sake of simplicity we’ll also assume they have plenty of the higher rate tax band left).
- No other capital disposals in the year (eg no sale of a second home, or disposal of a significant share portfolio).
- Qualifies for entrepreneurs relief.
- Company is registered in England/Wales. Scottish companies currently require an extra two statutory adverts, meaning liquidation costs are circa £160 higher.
Based on the above, if the company has £50,000 in the bank and one shareholder, the shareholder’s options are as follows:
- Strike the Company off – Pay £10 to Companies House. The £50,000 will be taxed on the shareholder as dividends (as ESC C16 no longer exists), at an effective personal tax rate of 32.5%. Total cost of using strike off = £16,260, being tax liability £16,250 + fees £10.
- Members Voluntary Liquidation – Pay £995+VAT+disbursements to MVL Online®. £50,000 taxed on shareholder as a capital gain, with £11,300 (2017/18 tax year) covered by annual exemption, remaining £37,139 (after costs) taxed at 10%. Total cost using MVL Online® = £5,275, being tax liability £3,714, + fees (inc VAT, estimate of disbursements & £25 estimate of solicitor’s signature witness fee) £1,561.
As you can see above, even after fees are taken into account (and assuming no fees other than the Companies House cost for striking off), there’s still a total saving of £9,357 to be made on a £50,000 bank balance. Typically the higher the balance the greater the saving.
Caveat – everyone’s circumstances are different, please speak to your accountant/tax adviser about precisely what the situation will be for you before proceeding. Our service covers the complete liquidation process, but we do not get involved in your personal tax affairs. it is up to you to declare the relevant income/gains in the appropriate places on your tax return.