MVL vs strike-off: which is right for a solvent close-down?

If the answer is under approximately £25,000 in distributable reserves, strike-off is usually the appropriate route. If the answer is meaningfully above £25,000, MVL is usually the appropriate route. The reason is tax.

HMRC’s Extra-Statutory Concession C16 (which formerly allowed any-amount distributions to be treated as capital on strike-off) was withdrawn in March 2012 and replaced by section 1030A Corporation Tax Act 2010. Under the current framework, distributions on strike-off are treated as capital only up to £25,000 — beyond that threshold, the entire distribution is treated as income (taxed at the recipient’s marginal rate, potentially up to 39.35% on dividend income for additional rate taxpayers).

MVL has no equivalent threshold. Distributions through MVL are treated as capital — eligible for Capital Gains Tax rates, and where qualifying, Business Asset Disposal Relief (BADR) reducing the rate to 14% from 6 April 2025 (rising to 18% from 6 April 2026) on qualifying gains up to a £1m lifetime allowance per individual.

For shareholders with reserves materially above £25,000, the tax difference can be substantial. The typical illustration: a director shareholder with £300,000 of distributable reserves choosing MVL over strike-off saves approximately £35,000–£50,000 in personal tax depending on individual circumstances. Below the threshold, strike-off is simpler and cheaper.

Strike-off is the simpler of the two procedures. The director files form DS01 with Companies House, the company is advertised in the London Gazette, and after a two-month notice period the company is struck from the register and ceases to exist. There is no liquidator, no formal asset distribution process, and the procedural cost is small (the Companies House DS01 fee is currently £33 online; £44 by paper).

Strike-off is appropriate when:

• The company has minimal reserves (under £25,000 distributable)
• The company has no liabilities the directors are unable to settle in full
• The company has not traded or changed its name in the last three months
• The company has not been subject to (or threatened with) insolvency proceedings
• All assets have been distributed before the application is filed

Section 1003(1) CA 2006 sets out the qualifying conditions; section 1004 sets out the bar conditions (recent trading, name change, asset disposal). Directors filing form DS01 are committing to those conditions and the consequences of misstatement can be serious — including personal liability if a creditor is later prejudiced, and criminal liability under section 1006 for false statements.

The principal practical risk with strike-off is the company continuing to have liabilities that emerge after dissolution. Any creditor (or HMRC) can apply to restore the company to the register under section 1024 CA 2006 within six years of dissolution — and a restored company can be sued for the original liability. For solvent close-downs of small companies with no significant counterparties, this risk is low. For close-downs with substantial historic activity, the risk is higher.

MVL is a formal insolvency procedure used for solvent companies. The director makes a statutory declaration of solvency (Form 4.70) confirming the company can pay its debts in full within 12 months, the members pass a resolution to wind up, and a Licensed Insolvency Practitioner is appointed as liquidator. The liquidator realises the assets, settles all liabilities, and distributes the surplus to members — in cash or in specie.

MVL is appropriate when:

• The company has reserves materially above £25,000 distributable
• The shareholders want capital tax treatment (BADR-eligible gains, where qualifying)
• The shareholders want procedural certainty — the formal close-down with liquidator’s certificate of distribution
• The company has assets requiring formal realisation (property, equipment, investments)
• Members want the protection that comes with formal dissolution rather than strike-off restoration risk

MVL is statutorily defined under sections 89–96B Insolvency Act 1986. Once the liquidator is appointed, the directors’ powers cease (section 91 IA 1986) and the liquidator has the duty to distribute the surplus and account to members. The procedure typically takes 6–9 months from appointment to dissolution, depending on asset realisation complexity and HMRC clearance timing.

The principal cost is the IP fee. Simple MVL fees start at £2,500 + VAT and disbursements — typical SME MVLs run £2,500–£5,000 + VAT depending on case complexity. Disbursements (Companies House fees, advertising, professional searches) are typically modest (£500–£1,000).

Ten dimensions side-by-side. Where the two routes differ materially, the difference is captured here in the language a director can take into a board discussion.

Most solvent close-down decisions fit one of five scenarios. Knowing which scenario applies usually answers the question.

Business Asset Disposal Relief (BADR, formerly Entrepreneurs’ Relief) is the single most consequential tax consideration for most owner-managed company close-downs. BADR reduces the Capital Gains Tax rate to 14% (from 6 April 2025; rising to 18% from 6 April 2026) on qualifying gains, up to a lifetime allowance of £1m per individual.

For directors meeting all four qualifying conditions, BADR converts what would be 24% capital gains tax (or up to 39.35% income tax via dividend treatment) into 14%. On £100,000 of qualifying gain, this is a tax saving of approximately £10,000–£25,000 per shareholder depending on circumstances.

BADR is not available on strike-off distributions above the £25,000 threshold (because the distribution is treated as income, not capital). This is the principal reason MVL is the right route for shareholders extracting reserves above £25,000.

BADR availability is fact-specific and timing-sensitive. The 24-month test means a director who reduces their shareholding below 5% (e.g., through a pre-MVL share transfer) before the disposal can lose BADR entirely. Tax planning involving BADR should be reviewed with a Chartered Accountant — we work alongside the company’s tax adviser on these decisions.

Both procedures require the director to make formal statements about the company’s solvency. The consequences of getting this wrong are different but both serious.

Strike-off (DS01)

The director declares the company meets the qualifying conditions in section 1003 CA 2006. False statements are a criminal offence under section 1006 CA 2006 — punishable by fine. If a creditor emerges post-strike-off and applies for restoration, the director may face personal liability for the original debt where the company was struck off in circumstances that prejudiced the creditor.

MVL (statutory declaration of solvency, Form 4.70)

The director declares that the company can pay its debts in full within 12 months. False declaration is a criminal offence under section 89(4) Insolvency Act 1986 — punishable by fine and/or imprisonment. The IP appointed as liquidator has a duty to challenge a declaration that proves to be wrong (typically by converting the procedure to a Creditors’ Voluntary Liquidation under section 96 IA 1986 if assets prove insufficient).

In both procedures, the director should ensure the position they declare is supported by proper underlying information — reviewed accounts, debtor and creditor schedules, contingent liability assessment. Where the position is genuinely uncertain (e.g., possible HMRC enquiries open, contingent contractual claims), MVL’s protective procedural framework is materially better than strike-off.

For a deeper review of director duties when financial difficulty is in prospect, see the wrongful trading spoke — the principal director-personal-liability mechanism if continued trading prejudices creditors.

Our typical first conversation with a director considering close-down is 30–45 minutes. In that time, we usually establish enough about the company’s position to recommend the appropriate route. The variables we work through:

• Distributable reserves (verified against latest accounts)
• Shareholder position (BADR qualification testing)
• Trading history and creditor exposure (residual claim assessment)
• Asset position (cash vs property vs investment)
• Tax planning timing (BADR lifetime allowance position; spouse/family tax planning)

If MVL is clearly appropriate, we provide the indicative fee at engagement (typically simple MVL from £2,500 + VAT). If strike-off is clearly appropriate, we explain the procedure and suggest the director files DS01 directly through Companies House (we don’t charge for strike-off advisory work where the director can file themselves). If the position is genuinely borderline, we discuss the trade-offs honestly and let the director decide.

If you are leaning toward MVL: see the Members’ Voluntary Liquidation pillar for the procedure detail.

If you are leaning toward strike-off: see the Strike-off and Dissolution pillar for the procedural detail.

If you want to talk it through: book a free 30–45 minute conversation with Simon at the Contact page or call 020 8153 1270. Indicative fees can be obtained quickly through the Get a Quote calculator.

If you want to read about the personal-exposure dimension: see the wrongful trading spoke for the section 214 IA 1986 framework on personal director liability.

Most close-down decisions resolve in a single conversation. We will work through the variables — reserves, BADR position, residual creditor risk, timing — and recommend the appropriate route. Where MVL is right, we provide an indicative fee at engagement and book the procedure for a date that fits your tax-year planning. Where strike-off is right, we explain the procedure and let you file directly through Companies House without charge for advisory work.

Free initial conversation. Honest recommendations. No obligation.

This decision-aid spoke sits between the MVL and strike-off procedural pillars. The pages below cover the procedural detail, the wider close-down framework, and the adjacent director-duties spokes.