Then an MVL may be what you need
A Members Voluntary Liquidation is not only used when a company is solvent and at the end of its natural life, it can also be used as a tax efficient tool to restructure a company, as it will allow the assets to be divided without triggering tax liabilities. An S110 reconstruction can be utilised when the whole or part of the company’s business or property is to be transferred or sold.
The directors may wish to restructure a company for many different reasons, such as to split the assets of an existing company, to remove a loss-making element of a business or where the shareholders wish for a business to continue but they no longer wish to do this together.
An S110 reconstruction involves the formation of two or more new companies and the original company is placed into Liquidation. The assets of the liquidated company are then transferred to the new companies, and in consideration of those assets the Liquidator receives shares in the new companies. These shares are then distributed to the shareholders of the liquidated company, based on their requirements as set out in the S110 agreement, an example of which is shown below. Effectively the shareholders retain the same percentage of ownership of all assets but through different entities.
Prior to liquidation the company’s accountant would seek clearance from HMRC to confirm that no tax liability will be payable on the transfer of the assets. The new shares issued will be at the same value of the assets transferred to ensure there is no Capital Gain. The only tax charge that would arise in this scenario would be when the shares in the new companies are sold.
An S110 reconstruction is a legal document which would be drawn up by a solicitor in conjunction with a licensed Insolvency Practitioner to ensure the best possible tax outcome.
An example can be seen below.