Following the rescission of Extra Statutory Concession (“ESC”) 16, it is no longer possible, except in exceptional circumstances, to extract funds in excess of £25,000 from a company and for those funds to be treated as a capital distribution, rather than income, unless the company is first placed into liquidation.
Whilst an MVL is a solvent liquidation, the legislation provides for only licensed insolvency practitioners to carry out this process.
The process is relatively straight forward, since it seldom involves any input from creditors other than H M Revenue & Customs in respect of accrued Corporation Tax liabilities. However, as with many major steps in life, it does need to be carefully planned.
The cost of the process is always a major consideration and it is possible for this to be minimised by ensuring that all assets have been realised and all liabilities paid, to the extent they can be, before the process begins. If an insolvency practitioner has to be involved in the realisation of assets and payment of liabilities, the process will be expensive.