Should entrepreneurs act quickly to save tax?
Proposed changes to the tax relief currently available to entrepreneurs could mean a significant reduction in income when the business is sold, if implemented. Those who could be negatively affected may want to consider exiting their business early, using a Members’ Voluntary Liquidation (MVL) process, to protect their returns.
A Members’ Voluntary Liquidation (MVL) is a formal process for closing down a solvent company in a cost-effective, tax-efficient way. It is often used as a means to exit viable businesses where shareholders wish to take out the profits of their investment, or if the business has simply come to the end of its useful life and directors wish to formally close the company.
Under current tax rules the entrepreneurs tax relief, introduced by Alistair Darling more than ten years ago, means that in certain conditions small business owners pay a discounted 10% rate on Capital Gains Tax (CGT) rather than the usual 20% due under standard CGT when they exit their enterprise, up to a lifetime maximum of £10 million.