Striking off vs MVL — choosing the right dissolution method
Voluntary striking off (Form DS01 — £8 online): directors apply to Companies House; company must have ceased trading and made no value disposals in past 3 months; notify all creditors before or on application date; dissolved 3 months after Gazette notice; appropriate for net assets below ~£25,000. MVL (Members' Voluntary Liquidation): directors make Declaration of Solvency; shareholders pass special resolution; licensed IP appointed as liquidator; IP realises assets; pays creditors; distributes net proceeds to shareholders as capital distribution; cost £2,000-£5,000+; appropriate for larger distributions or complex creditors.
- Striking off: cheap and simple; HMRC can object if outstanding tax liabilities — resolve all corporation tax, VAT, and PAYE before applying
- MVL: formal solvent winding-up; licensed IP required; gives stronger HMRC clearance protection; preferred for distributions above ~£25,000
- HMRC clearance: advisable where retained profits; connected-party transactions; or potential TAAR risk (ITTOIA 2005 s.396B recharacterisation of income profits as capital distribution)
- TAAR risk: highest where shareholder continues similar business after wind-up — HMRC can recharacterise capital distribution as income distribution taxed at income tax rates
SDLT on in-specie property distribution and CGT/BADR on dissolution
SDLT on in-specie property distribution (FA 2003 s.53): transfer of property from company to connected shareholder triggers SDLT on market value even where no cash passes; residential rates including 3% surcharge apply; usually more tax-efficient to sell property in open market and distribute cash proceeds. CGT: shareholders receive capital distribution on dissolution — treated as disposal of shares at CGT rates (18% basic; 24% higher rate from October 2024). BADR: BTL property investment companies are NOT trading companies — generally do NOT qualify for BADR 10% rate.
- SDLT on in-specie distribution: FA 2003 s.53 charges market value SDLT on connected-company property transfers even with nil cash consideration
- In-specie example: £300,000 property distributed to sole shareholder — SDLT payable at full residential rates including 3% surcharge (e.g., £9,000+) — payable immediately
- BTL investment company: NOT a trading company — BADR (10% CGT rate up to £1m lifetime limit) generally NOT available; CGT at 18% or 24% on share proceeds
- Property development company (buys; develops; sells as trade): MAY qualify as trading company for BADR — specialist tax advice required