Autumn Budget 2024 and its impact on exiting a company
The Autumn Budget is expected to significantly change the tax treatment of solvent companies winding up their affairs.
02 October 2024
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The Autumn Budget on 30 October 2024 is expected to bring significant changes to the tax treatment of solvent companies winding up their affairs.
The upcoming Budget is expected to impact on the treatment of Members Voluntary Liquidations (MVLs), a favourable method for solvent companies to wind up their affairs in a tax-efficient manner.
Jasmine Cockerham of our Exeter Restructuring Team explains.
What is an MVL?
An MVL is a regulated process overseen by a licensed Insolvency Practitioner to wind up the affairs of a solvent company and distribute its assets to shareholders in a more tax-efficient way than simply dissolving the company.
The process is usually popular when a company has fulfilled its purpose or when the owners wish to retire.
One key advantage of an MVL is that distributions to shareholders are taxed under CGT rather than income tax, which offers a significant tax saving.
Potential changes in the Autumn Budget
One of the most anticipated changes of the Budget is the potential increase in CGT rates. As considered above, CGT rates are currently lower than income tax rates, making MVLs an attractive option. Should CGT rates increase as expected, the benefits of MVLs will be impacted.
Another point to consider is the concern around potential changes to Business Asset Disposal Relief (BADR), formerly known as Entrepreneurs’ Relief. BADR is designed to reduce the amount of CGT you pay when you sell or dispose of your business.
BADR allows qualifying business owners to pay a reduced CGT rate of 10% on gains, rather than the standard rates. There is currently a lifetime limit of £1million and this may end up being reduced as part of the Budget.
There are also concerns that a stricter eligibility criteria will be put in place – this could affect the ownership period or the type of businesses that qualify.
See our earlier article: Might we see changes to CGT after the election?
Strategic Considerations
Given the potential changes expected from the Budget, business owners considering an MVL should consider entering into one before the budget announcement to lock in the current tax rates.
Acting swiftly and seeking professional advice can help you navigate these potential changes and ensure the best outcome for your financial future.
If you think an MVL may be for you, please get in touch with us.
Contact us
If you are an adviser or a business owner, and you wish to discuss the solvent winding-up process in further detail, please get in touch with us and we will be pleased to offer you a free, no-obligation initial consultation.
Please contact Jasmine at JCockerham@bishopfleming.co.uk or a member of our Restructuring Team for a conversation.
Further reading
Check out our other Budget-related articles:
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