Why now is the time to revisit MVLs

For many directors, the decision to close a company isn’t triggered by failure. It’s driven by success. A project has ended. A new opportunity has emerged. The business has served its purpose and the time has come to draw a line under it.

In these situations, their accountant is often the first port of call. Clients look to you not just for compliance, but for a clear, tax-efficient roadmap to closure. That means identifying the right structure, timing and treatment of retained profits, to make sure value isn’t lost to unnecessary tax exposure.

When a company is solvent and holds more than £25,000 in retained profits, an MVL is often the most effective way to extract funds. And for shareholders who meet the conditions, Business Asset Disposal Relief (BADR) enhances that efficiency.

However, BADR is slowly becoming less generous. This April, the rate went from 10% to 14%. And from April 2026, it’s set to rise again to 18%. This makes the next ten months a planning window worth acting on.

A straightforward solution with strategic value

At its core, an MVL converts retained profits into capital. That capital is then distributed to shareholders in a structured, HMRC-compliant process, typically handled by a licensed insolvency practitioner. If your client’s eligible for BADR, the tax treatment becomes significantly more favourable.

MVLs are quick, clean and well-established. In straightforward cases, distributions can be made in weeks, with final closure usually completed within 6–12 months. Unlike informal strike-offs, MVLs offer clarity and an assurance for directors that there are no loose ends.

The real impact of the BADR changes

The window to maximise returns from BADR is narrowing. The relief currently allows qualifying shareholders to pay 14% Capital Gains Tax on gains up to a lifetime limit of £1 million. But from April 2026, that rate rises to 18%.

A 4% change might not sound like much until you look at the numbers.

Take a client with £150,000 in retained profits:

Exit route	Tax owed	Net proceeds
Dividend (39.35%)	£59,025	£90,975
MVL with BADR @ 14%	£21,000	£129,000
MVL with BADR @ 18%	£27,000	£123,000

Even at 18%, an MVL still outperforms a dividend route by a wide margin. But acting before April 2026 could preserve an extra £6,000 for the client—value that would otherwise be handed back to HMRC.

Is your client BADR-eligible?

BADR has precise qualifying conditions. To access it, the shareholder must:

•           Have held at least 5% of ordinary share capital and voting rights

•           Have been an employee or officer of the company

•           Have owned the shares for at least two years

•           Be exiting a trading company (or trading group holding company)

Companies that have gone dormant, shifted into investment activity, or seen shareholding dilution could fall outside the scope, sometimes without the client realising. That’s why we’re here to help you review eligibility and help your client make the best decision for their exit.

Where MVLs fit best

MVLs are a strong fit for:

•           Retiring directors with dormant, cash-rich companies

•           Contractors exiting limited company structures post-IR35

•           Group restructures involving surplus subsidiaries

•           Business owners moving to PAYE or launching a new venture

In any of these cases, where retained profits exceed £25,000 and there’s no future trade planned, an MVL is likely to offer the best outcome.

How we work with you

You’re the one with full visibility. You know your client’s structure, their timelines, and their tax exposure. That puts you in the best position to spot when an MVL is appropriate and work with us to make it a seamless experience for your client. This includes:

•           Finalising management accounts

•           Advising on final salary or dividend payments

•           Confirming BADR eligibility and timing

•           Ensuring liabilities are quantified and cleared

•           Coordinating the date of distribution to lock in the most favourable CGT rate

That last point matters. It’s the distribution date, not the intent, that determines the rate applied. Planning the process properly so that it lands before the April 2026 deadline will make a real difference.

Avoiding common pitfalls

We see BADR fail for a handful of predictable reasons:

•           Directors step down too early, losing officer status

•           Shareholdings fall below 5% through dilution or past restructuring

•           The company drifts post-trade and no longer qualifies as “trading”

•           The final distribution is delayed until after 5 April 2026, missing the lower rate

These are all avoidable, but only with proactive planning. And that’s where your foresight adds the most value.

Planning now avoids regret later

For clients with dormant companies and significant retained profits, this might be their final opportunity to extract that value at the 14% CGT rate.

As the April 2026 deadline draws closer, now is the time to identify eligible clients, review structures, and trigger the MVL process early. It's not just about tax planning. It’s about delivering the value they trust you to protect.

Our team works with CPAA accountants across the UK to deliver solvent liquidations that are technically sound, tax-efficient and handled with clarity. Fixed fees. No hidden costs. Practical advice. You can get in touch with us for a free consultation on 01908 754666 or by emailing enquiries@ftsrecovery.co.uk