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Sterling Ford - Insolvency & Bankruptcy Services


STERLING FORD'S MVL SERVICES FOR TAX YEAR 2021/22

REASONS WHY YOU SHOULD USE STERLING FORD'S MVL SERVICE BEFORE 3rd MARCH 2021 [BUDGET DAY] OR IF APPROPRIATE, 6th APRIL 2021 [NEW TAX YEAR]


  1. Potential Changes to Capital Gains Tax, the Annual Exempt Amount and to Business Asset Disposal Relief/Entrepreneur's Relief could be introduced in the next budget. With the considerable strain on the UK economy the pandemic has caused so far, as well as to counter the short to medium term impact from Brexit, all options may be back on the table for the coming Budget on 3rd March 2021. In July 2020, the Office of Tax Simplification (OTS) was asked by the Chancellor to review Capital Gains Tax (CGT) and a number of the potential changes being considered could be introduced, either effective from Budget Day [3rd March 2021] or from the New Tax Year [6th April 2021]. These changes could include: an increase in the rate of CGT - possibly an increase by 10% to 30%, a reduction [possibly a significant reduction] in the Annual Exempt Amount and a potential retargeting of Business Asset Disposal Relief/Entrepreneur's Relief to restrict its availability to perhaps retirement-based disposals.

  2. IR35. Reforms to Off-payroll Working Rules, known as IR35, which were postponed in March 2020, are expected to come into force on 6th April 2021. If you are a contractor and your contract hasn't been renewed or is not going to be renewed, or you have been offered permanent employment, there is still time to place your company in members' voluntary liquidation, so that you may claim this year's CGT annual exemption, as well as Business Asset Disposal Relief [entrepreneur's relief] on your first or all capital distributions if received before 3rd March 2021 [Budget Day] or, if appropriate, before 6th April 2021 [New Tax Year].

  3. MVL Tax Clearances will take considerably longer to obtain. With shortages of HMRC staff in the MVL Team, CT Operations and associated departments due to their redeployment to the Government's Job Retention and Self-employed Income Support Schemes et al., it is expected to take a few months longer to obtain tax clearances for MVLs than before the pandemic.


DEADLINES FOR PLACING COMPANIES IN MVL IF YOU WISH TO RECEIVE ALL CAPITAL DISTRIBUTIONS BEFORE 3rd MARCH 2021 [BUDGET DAY], OR IF APPROPRIATE, BEFORE 6th APRIL 2021 [NEW TAX YEAR]



FOR DISTRIBUTIONS TO BE MADE BEFORE 5TH APRIL 2021:


  1. CASH BASED LIQUIDATIONS MUST COMMENCE NO LATER THAN 1ST MARCH 2021 - STERLING FORD TO BE CONTACTED NO LATER THAN 22ND FEBRUARY 2021
  2. NON-CASH BASED LIQUIDATIONS MUST COMMENCE NO LATER THAN 1ST APRIL 2021 [AS FRIDAY 2ND APRIL 2021 AND MONDAY 5TH APRIL 2021 ARE EASTER BANK HOLDAYS] - STERLING FORD TO BE CONTACTED NO LATER THAN 12 NOON 25TH MARCH 2021

FOR DISTRIBUTIONS TO BE MADE ON BEFORE 2ND MARCH 2021 [BEFORE BUDGET DAY 3rd MARCH 2021]:


  1. CASH BASED LIQUIDATIONS MUST COMMENCE NO LATER THAN 1st FEBRUARY 2021 - STERLING FORD TO BE CONTACTED NO LATER THAN 25th JANUARY 2021
  2. NON-CASH BASED LIQUIDATIONS MUST COMMENCE NO LATER THAN 1st FEBRUARY 2021 - STERLING FORD TO BE CONTACTED NO LATER THAN 12 NOON 26th FEBRUARY 2021


IF YOU REQUIRE THE LATEST DEADLINE BY WHICH TO PLACE YOUR COMPANY/LLP IN MVL, THEN ONLY NON-CASH LIQUIDATIONS WILL BE POSSIBLE


IF YOUR COMPANY'S ESTATE IS 'CASH' BASED AND YOU WANT TO KNOW HOW, YOU MAY BE ABLE TO CONVERT IT TO A 'NON-CASH' BASED ESTATE, PLEASE LET US KNOW ASAP.



We strongly recommend you obtain appropriate, independent, professional advice from your tax advisor or accountant, before contacting us.



STERLING FORD'S MVL SERVICE


STEPS FOR PLACING A COMPANY IN MEMBERS' VOLUNTARY LIQUIDATION


1. MVL Quote

Once you have contacted us, whether online by email, completing our online enquiry form, or by telephone, and you have confirmed the name of your company and the gross asset value of the company's estate, we will prepare and send you a MVL Quote, which will set out the following:



1.1 Liquidation Fees

The fees we charge are based on a scale to reflect the risks and responsibilities of estates of different sizes and complexity and varying numbers of directors, persons of significant control and members. The size of an estate, expressed by gross asset value [GAV] and the liquidation fees, subject to VAT, are as follows:

GAV £ Fee £
0 - 250,000 1,150
250,000 - 500,000 1,250
500,000 - 1m 1,375
1m - 1.5m 1,500
1.5m - 2m 1,750
2m - 2.5m 2,000
2.5m - 3m 2,500
3m - 4m 3,000
4m - 5m 4,000
5 - 7.5m 5,000
7.5m - 10m 7,500
10m+ P.O.A
Discounts to fees shall be applied for groups of companies, with 2 or more companies with common ownership being placed in liquidation at the same time. Additional charges shall apply, where:


1.1.1 There are more than 2 directors/persons of significant control [PSC] in total - an additional charge of £75 plus VAT shall be charged for each additional director and PSC in excess of 2 in total, in view of the additional costs of anti-money laundering checks/vetting etc.


1.1.2 There are more than 3 members - an additional charge per member [from the 4th member] shall be as follows: Total: 4-5 members - £60 per member; 6-9 members - £50 per member; 10-20 members - £45 per member; 20-50 members - £40 per member; and 50+ members - £P.O.A


1.1.3 Formal Assignment/Transfers of assets in specie - Deeds of Assignment [book debts/loan books/other debtors including inter-company balances, portfolios of investments, royalties, intellectual property etc., Transfer of Freehold/Leasehold Property - fees from £450 plus VAT per Deed, but subject to discount if more than one Deed is required


1.1.4 If the company has/had a full VAT registration, VAT may be recovered in the liquidation where possible at a charge of £85 plus VAT per VAT 427 claim in respect of the costs of liquidation and any professional fees: solicitors, accountants, agents/surveyors


1.1.5 In the event the company's deregistration from VAT is not applied for online pre-liquidation by the client/their accountant, an additional charge of £120 plus VAT would be payable for manual [postal] deregistration, which could also delay VAT clearance by more than 3 months



Disbursements


1.2.1 Bonding insurance - it is a legal requirement that each estate is insured by the appointed insolvency practitioner and the premium payable is based on the following bands of gross asset value.

Band of Gross Asset Value Premium
£500 to £5,000 £22
£5,001 to £10,000 £22
£10,001 to £25,000 £40
£25,001 to £50,000 £93
£50,001 to £100,000 £138
£100,001 to £250,000 £255
£250,001 to £500,000 £360
£500,001 to £1,000,000 £515
£1,000,001 to £2,000,000 £760
£2,000,001 to £3,500,000 £910
£3,500,001 to £5,000,000 £1,365
£5,000,001 plus £1,520

Source:AUA Insolvency Risk Services Limited - Table C Sterling Ford - 1st March 2020



1.2.2 Other disbursements including statutory advertising - £299 plus VAT - the insertion of 3 notices [Resolutions, Appointment of Liquidator and Notice of Intended Distribution] in the appropriate Gazette [London, Edinburgh and Belfast], governed by the location of a company's registered office [England &Wales, Scotland and N. Ireland].



Worked examples

Cost of Liquidation for both: VAT registered and non-VAT registered Companies:


  1. A company with one director/PSC/member, with a GAV of £95,000. Our charges would be £1,672 for a VAT registered company and £1,876.80 including VAT for a non-VAT registered company, as set out below:
    Cost of Liquidation VAT Registered Non-VAT Registered
    Net £ Vat £ Total £
    Liquidation Fee: 1,150.00 230.00 1,380.00
    Disbursements incl.
    Statutory advertising: 299.00 59.80 358.40
    Bonding 138.00 138.00
    437.00 59.80 496.80
    Sub-total 1,587.00 289.80 1,876.80
    VAT recovery fee 85.00 17.00
    Total cost of liquidation 1,672.00 306.80

  2. A company with 2 directors/PSCs/members, with a GAV of £305,000. Our charges would be £1,994 for a VAT registered company and £2,218.80 including VAT for a non-VAT registered company, as set out below:
    Cost of Liquidation VAT Registered Non-VAT Registered
    Net £ Vat £ Total£
    Liquidation Fee: 1,250.00 250.00 1,500.00
    Disbursements incl.
    Statutory advertising: 299.00 59.80 358.80
    Bonding 360.00 360.00
    659.00 59.80 718.80
    Sub-total 1,909.00 309.80 2,218.80
    VAT recovery fee 85.00 17.00
    Total cost of liquidation 1,994.00 326.80

  3. A company with 3 directors/PSCs and 6 members, with a GAV of £650,000. Our charges would be £2,499 for a VAT registered company and £2,793.80 including VAT for a non-VAT registered company, as set out below:
    .00
    Cost of Liquidation VAT Registered Non-VAT Registered
    Net £ Vat £ Total £
    Liquidation Fee: 1,375.00 275.00 1,650.00
    Additional charge for 1 extra director/PSC and +3 extra members 75.00 + 150.00 = 225.00 15.00 + 30.00 = 45.00 90.00 + 180.00 = 270.00
    Sub-total 1,600.00 320.00 1,920.00
    Disbursements incl
    Statutory advertising: 299.00 59.80 358.80
    Bonding 515 515.00
    814.00 59.80 873.80
    Sub-total 2,414.00 379.80 2,793.80
    VAT recovery fee 85.00 17.00
    Total cost of liquidation 2,499.00 396.80

  4. A company with 4 directors and 1 PSC [who is not a director] and 16 members, with a GAV of £2.65m. Our charges would be £3,810 for a VAT registered company and £4,454.40 including VAT for a non-VAT registered company, as set out below:
    Cost of Liquidation VAT Registered Non-VAT Registered
    Net £ Vat £ Total £
    Liquidation Fee: 2,500.00 500.00 3,000.00
    Additional charge for 2 extra directors and 1 PSC and + 13 extra members 225.00 + 585.00 = 810.00 45.00 + 117.00 = 162.00 270.00 + 702.00 = 972.00
    Sub-total 3,310.00 662.00 3,972.00
    Disbursements incl.
    Statutory advertising: 299.00 59.80 358.80
    Bonding 910.00 910.00
    1,209.00 59.80 1,268.80
    Sub-total 4,519.00 721.80 5,240.80
    VAT recovery fee 85.00 17.00
    Total cost of liquidation 4,604.00 738.80

General points to note:

  1. Our MVL Quotes are provided for an 'execution/implementation only' MVL service on the strict understanding that companies, their directors, members and PSCs/beneficial owners have obtained appropriate and comprehensive tax, financial and legal advice on the suitability of an MVL to their particular circumstances, the availability of any tax advantages including entrepreneur's relief and the likelihood of the imposition of any penalties and higher rates of tax if the Targeted Anti-Avoidance Rule introduced by HMRC from 6 April 2016 [ see link] or other measures are applied by HMRC in any event, including but not limited to, the event of any future involvement in the same or similar trade or activity, carried on within a period of two years of a winding up, or for whatever other reason.
  2. Members can opt to receive an interim cash distribution of up to 75% of the net funds held, within 28 days of appointment [typically paid on the 25th/26th day following appointment], provided the liquidator is in possession of the estate's funds on, or soon after, his appointment, with the balance distributed approximately 4-6months later i.e. as soon as tax clearance has been obtained or the distribution may be deferred until the following tax year if preferred/where possible e.g. until after 6 April 2021] - all distributions [and any other payments, including VAT/tax liabilities to be met and accountants fees] are paid by Faster Payments/CHAPS transfer, subject to Sterling Ford's Terms and Conditions. 3)All members/beneficial owners of all companies in MVL are required to sign a Deed of Indemnity. The indemnity is limited to the sums [or equivalent] [to be] distributed.
  3. Once we have been provided the name of the Company, we would check the notice provisions of the Company's articles of association and confirm if the members of the company are not prohibited from consenting to short notice of a General Meeting [at which the requisite special resolution would be passed to place the company in liquidation], so that they may place the company in liquidation whenever they wish.
  4. Whilst a copy of the Declaration is required to be sent to HMRC, HMRC only relies on the accounts and CT600 return they would receive in due course for the final accounting period, which would be to and include the day immediately before the date of liquidation, which itself represents the start of a new accounting period. So for example, if you wanted to place the Company in liquidation on Monday 1st February 2021, then, given HMRC's requirements that there should be NO gaps between the last day of the final pre-liquidation accounting period and the date of commencement of liquidation, the final period's accounts would have to be prepared up to and including Sunday 31st January 2021, even if there has been no trading and only a Nil CT600 is to be filed. By doing this the process of obtaining tax clearance would be accelerated. Please note that it is not necessary for the final period's accounts/CT600 to be filed before liquidation, but it is recommended they are filed within 3 weeks after commencement, so as not to delay the receipt of final tax clearance prior to concluding the winding up [and also to avoid being locked out from HMRC online].
  5. As interest at the official rate, also referred to as statutory interest', at 8% p.a. is payable on debts from the date of liquidation, including any corporation tax payable for the final pre-liquidation accounting period, we would recommend that all debts be discharged prior to liquidation if at all possible.
  6. If relevant, directors/members should seek tax advice regarding HMRC's tax manual which refers to a change in HMRC's treatment of directors' loans when offset against members' entitlements to receive capital distributions.


2. MVL Packs

2.1 MVL Pack Part 1


With each MVL quote, we would attach for completion and return [if the prospective client wished to proceed] MVL Pack Part 1, which comprises 3 items as follows:

  1. MVL Questionnaire - so that we may be provided, inter alia, with: the VAT registration number, PAYE scheme reference and UTR so that we would be able to chase HMRC for tax clearance without delay should we be instructed to proceed.
  2. Anti-Money Laundering (AML) Questionnaire - we are required by Money Laundering and Insolvency Regulations that we verify who is instructing us and if appropriate, the nature and source of the company's assets [cash and non-cash assets] proposed to be placed in the liquidator's control for the purpose of the liquidation. Directors/members of companies (with at least 25% of the issued shares)/persons of significant control, are required to provide a certified copy of their passport as well as a certified copy of a recent [within 3 months] utility bill/bank/telephone/mobile phone statement or similar [any one of] as proof of address.
  3. Declaration of Solvency embodying a Statement of Assets & Liabilities-in view of social distancing, we provide a Declaration to be made before a solicitor by video conference [presently permitted by the Insolvency Service and Companies House], or if preferred, before a solicitor in person.

The Declaration of Solvency must be made before the Special Resolution is passed to place a company in members' voluntary liquidation, so if you wanted to place a company in liquidation on Monday 1st February 2021,the Declaration should have been made and returned with items 1 and 2 of MVL Pack Part 1 no later than 10am, Thursday 28th January 2021, so that we would have time to check the 3 items of MVL Pack Part 1 and prepare and issue the 9/10 items making up MVL Pack Part 2.



2.2 MVL Pack Part 2

The MVL Pack Part 2, comprising all forms and documents required to place a company into liquidation, would be issued once we had completed our pre-appointment ethical and anti-money laundering reviews and consists of:

  1. Minutes of Directors Meeting - instructions to Sterling Ford and convening General Meeting to place company in MVL
  2. Notice of General Meeting - (where on short notice, typically convened to take place within 7 days depending on the number of members to receive notice)
  3. Proxy - required if there are 2 or more members
  4. Resolutions - to wind up, appoint a liquidator and to distribute the assets in specie
  5. Minutes of General Meeting
  6. Deed of Indemnity - in the event of unforeseen creditors arising, limited to the sums distributed
  7. Consent to Act - a licensed insolvency practitioner must consent to accept the appointment once he has completed his ethical and money laundering reviews
  8. Sterling Ford Terms & Scale of Charges (C) - setting out, inter alia, both our responsibilities and the directors' and members' instructions to the liquidator with regard to their distributions
  9. Consent to Short Notice- to permit the General Meeting to be held on short notice [minimum of 95% and 90% majorities for companies incorporated under the Companies Act 1985 and 2006, respectively]

For a different perspective, call us now on 0808 171 2291 or complete our enquiry form.