When considering the most efficient way in which a solvent company can be wound-up, there are few feasible options. In previous years it was possible to use HMRC extra statutory concession (ESC16) to obtain approval from the Revenue to treat the distribution from the company as a capital distribution, and then strike off the company.
However, this option has not been available since 2012 and now distributions in excess of £25,000 are automatically treated as income, unless funds are paid to the shareholder out of a MVL.
Funds distributed out of MVL are treated as capital receipts and subject to Entrepreneurs’ Relief which can be claimed on capital gains on qualifying shares. Generally, individual shareholders’ prefer that distributions received by them are treated as capital receipts in order to benefit from more favourable tax treatment.
Notwithstanding the benefits of an MVL, the strike-off procedure could still be the best alternative in certain circumstances. It is only appropriate in relation to a company that is redundant for all practical purposes, and cannot be used if a company has any assets, or liabilities, or has been active within the previous three months.
An application is made by submitting a simple form to Companies House (Form DS01), together with a fee of £10. A copy of the application must be sent to the Registrar of Companies and various other parties. Once the application is received, the Registrar will publish notice of the application to strike-off and, if no objection is received within 3 months of publication, the company will be struck off the register, and subsequently dissolved.