Proposed changes to MVLs and the effect on Entrepreneurs Relief
Changes were announced in the Finance Bill 2016 which are expected to come into force on 5 April 2016 which could have an impact on who may be entitled to claim entrepreneurs relief following the capital distribution from a solvent liquidation (MVL).
This is likely to have a major impact on consultancy businesses and, potentially, could also impact on business owners looking to retire. It is expected that where a company is placed into MVL and the shareholder(s), within two years following the date of distribution, “is involved with the carrying on of the trade or activity that is similar to that of the trade or activity carried on by the wound up company”, that entrepreneurs relief will be withdrawn.
This “carrying on of the trade” could either be by the shareholders concerned, or a person or company connected to them and is likely to include retiring business owners who sell their business to a third-party but are obliged to undertake consultancy assignments for the purchaser as part of the deal.
What to do if you have a client intending on applying for entrepreneurs’ relief
If you have a client that is intending on applying for entrepreneurs relief on monies received by way of a capital distribution from an MVL and they are also intending on carrying on in a similar business afterwards (or a connected party is) then they would need to ensure that the company is placed into liquidation and that the distribution of capital takes place before 5 April 2016 (please note that the relevant date is the date of the distribution and NOT the date of liquidation).
The company would need to be placed into liquidation by February/early March 2016 in order for the distribution to be able to be made within good time and to enable a liquidator to comply with their statutory deadlines.
MVL’s are one of the many procedures offered by the Bretts Business Recovery and if you would like more information please call 0808 168 7540 or email us at firstname.lastname@example.org