A Members’ Voluntary Liquidation (MVL) remains one of the most tax-efficient and cleanest ways for directors to close a solvent company. As we move into 2026, increasing scrutiny from HMRC, refined reporting requirements, and evolving best practices make it more important than ever for company directors to understand how the MVL process works and what to prepare.

To help demystify the process, Molly Monks of Parker Walsh, a specialist in solvent liquidations, offers valuable insights on how directors can navigate an MVL smoothly and maximise available tax benefits.

What Is an MVL?

A Members’ Voluntary Liquidation is a formal procedure used to close a company that can pay all of its debts in full within 12 months. Unlike insolvent liquidations, an MVL is initiated by the directors and approved by shareholders, with the clear goal of distributing remaining assets in a tax-efficient manner.

Significant Tax Advantages

One of the most compelling reasons to use an MVL is the favourable tax treatment on distributions:

• Capital Gains Tax (CGT) typically applies instead of income tax.
• Directors and shareholders may qualify for Business Asset Disposal Relief (BADR)
• MVLs can also be used to extract retained profits in a structured, HMRC-compliant manner, avoiding the risk of distributions being reclassified as income.

Step-By-Step Guide to the MVL Process

1. Confirm Solvency

Directors must be satisfied that the company can pay all debts, current and future, within 12 months. This includes tax liabilities, employee costs, outstanding loans, and contingent liabilities.

2. Molly Monks at Parker Walsh will assist in Preparing a Declaration of Solvency

This is a statutory document signed by the directors, setting out:

• A statement confirming solvency
• A detailed Statement of Assets and Liabilities
• Supporting financial records

This document must be sworn in front of a solicitor.

3. Pass the Special Resolution

Shareholders vote to place the company into MVL and appoint a licensed insolvency practitioner who will act as liquidator. (Firms like Parker Walsh guide directors through this stage to ensure a seamless transition.)

4. Transfer Control to the Liquidator

Once appointed, the liquidator:

• Settles outstanding debts
• Collects and realises company assets
• Distributes remaining funds to shareholders
• Files statutory notices with Companies House and HMRC

5. Receive Distributions

Shareholders typically receive an initial distribution shortly after liquidation begins, with final payments made once all liabilities are confirmed and cleared. These distributions are treated as capital, securing the tax advantages mentioned earlier.

6. Finalisation and Company Dissolution

After accounts are closed and reporting completed, the liquidator files final documents and the company is formally removed from the Companies House register.

Key Documentation Required for an MVL

To ensure a smooth process in 2026, directors should prepare:

• Recent management accounts
• Bank statements
• A schedule of assets and liabilities
• Details of contingent liabilities
• Corporation tax computations
• Accountant-prepared final accounts, if required

According to Molly Monks of Parker Walsh, clear documentation is the most common factor separating efficient MVLs from those that face delays.

Timing Considerations for 2026

Directors planning an MVL should consider:

1. Budget Changes

Spring and Autumn Budget updates may impact BADR, CGT rates, or anti-avoidance rules. Planning ahead reduces risk.

2. Accounting Timelines

Leaving adequate time to finalise accounts and calculate corporation tax avoids bottlenecks.

3. Shareholder Agreement Timing

All shareholders must approve the MVL, delays in obtaining signatures can postpone the liquidation date.

4. HMRC Response Times

While MVLs are typically efficient, HMRC clearances for VAT, PAYE, and corporation tax can influence the timeline.

Conclusion

A Members’ Voluntary Liquidation remains the gold standard for directors of solvent companies who want to wind down operations tax-efficiently, cleanly, and in compliance with UK regulations.

As Molly Monks of Parker Walsh emphasises, success in an MVL comes down to preparation, documentation, and choosing a liquidator with a strong track record in solvent closures.