This increase was mainly due to company directors reacting to changes in the tax rules which were coming into force in April 2016.As part of these new rules, directors who wind up a solvent company can no longer claim Entrepreneurs’ Relief from the Capital Gains Tax due on any gains if they continue to work in the same trade as that company in the next two years.While this new rule could be open to interpretation, the intention from HMRC is to stop directors from “phoenixing” their company purely to gain a tax advantage. for retirement or returning to full-time employment) are likely to remain a popular option for those consultants when the time is right for them to close down their company.

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A solvent liquidation – formally known as a Members’ Voluntary Liquidation (MVL) – is often the most tax-efficient way to close down a solvent company and save directors / shareholders thousands of pounds.

By using an MVL the funds to be distributed are subject to Capital Gains Tax, rather than Income Tax.

If directors qualify for Entrepreneur’s Relief they can benefit from a 10% marginal rate on distributions. In March 2016 a record number of solvent companies were wound up.

There were 2,663 MVLs compared to a monthly average of 768 over the previous year.

When a contractor is trading a limited company, there is likely to be a time when they would benefit from speaking to a Liquidator. Although the terms Liquidator and Insolvency Practitioner have negative connotations, the advice these professionals give can be of huge financial benefit to contractors.

The most common times when a company director would benefit from speaking to a Liquidator (i.e.

an Insolvency Practitioner) is when they are looking to: and they want to close down their company and take their money out in the most cost-effective way.

The fact that there is money in the company is a reflection on the success that the directors have had with their company.

A Liquidator can also be of help for a consultant who finds their company has cashflow difficulties.