Confidential Advice Line: 0800 063 9221

What is ‘phoenixism’ and how does it relate to Members’ Voluntary Liquidations (MVL)?

Question

What is ‘phoenixism’ and how does it relate to Members’ Voluntary Liquidations (MVL)?

Answer

Phoenixism is generally associated with pre pack administration, where the underlying assets of a failed business are sold, sometimes to the existing directors.  These directors then go on to form a new company, often operating in a similar vein.

The term can also relate to the solvent liquidation process (MVL), however, depending on the reasons for company closure. Members’ Voluntary Liquidation is a good solution for directors who wish to retire, for example, but who do not intend to engage in another similar trade.

HM Revenue and Customs believe the MVL process has been used as a form of tax planning in some instances, and are targeting anyone who closes down a company solely to reduce their tax liability.

Capital distributions generally attract significantly less tax than income, so HMRC have introduced a rule whereby individual shareholders in receipt of capital distributions will pay income tax on those amounts if they set up a similar company within two years.

This is part of several new measures introduced by the government in the Finance Bill, 2016, in an effort to combat tax avoidance.

 


More from FAQs from Company Liquidation

48 Regional UK Offices

Find your local Begbies Traynor office and speak to an adviser today.

Find your Local Office
0800 063 9221

Call our Confidential Advice Line. Calls to this number are free of charge.

Call us now...
Request a Meeting

We invite you to come and discuss your enquiry with us at your convenience.

Request a meeting...
0800 464 0871

Call our Confidential Advice Line. Calls to this number are free of charge.

Call us now...
Request a Meeting

We invite you to come and discuss your enquiry with us at your convenience.

Request a meeting...
0161 837 1700

Call our Confidential Advice Line. Calls to this number are free of charge.

Call us now...
Request a Meeting

We invite you to come and discuss your enquiry with us at your convenience.

Request a meeting...
Advice for businesses on EBTs after HMRC Supreme Court victory
Begbies Traynor currently advising numerous businesses
HMRC sends out follower notices to reclaim tax lost to Employee Benefit Trusts
Find out more →
 
Open Banking to Reshape the Alternative Finance Sector
CMA mandates the adoption of Open Banking by early 2018
Will see alternative lenders competing on a level playing field with dominant banks
Read more →
 
Join thousands of professionals by signing up for our updates
Analysis and Opinion from our Partners
Top Industry News
Register Now →
 

Advice you can trust

We are accredited by the following industry leading organisations

Insolvency Practitioners Association Institute of Chartered Accountants in England and Wales R3: Association of Business Recovery Professionals ICAEW Business Advice Service Turnaround Management Association ACCA (the Association of Chartered Certified Accountants) ICAS | The Institute of Chartered Accountants of Scotland

Contact the Begbies Traynor team

or Find your Nearest Office
Processing...