- Business Asset Disposal Relief
MVLs are typically recommended for companies with in excess of £25,000 worth of cash and/or assets to distribute. This is because extracting profits via an MVL at this level is much more tax-efficient than taking the money as income. Profits extracted by way of an MVL are classed as Capital Gains, rather than income, and therefore taxed accordingly.
Furthermore, shareholders can also take advantage of Business Asset Disposal Relief (BADR), which cuts the CGT rate in half down to just 10%. There is no limit to how many times BADR can be used, although individuals are capped up to a lifetime limit of £1m worth of gains.
During an MVL, a resolution can be passed to allow for certain assets to be transferred in their current form, rather than its equivalent value in cash; this is known as a distribution in specie. Both physical (property, vehicles) and non-physical assets (stocks, bonds) can be distributed in specie if this is deemed more preferable or practical than liquidating the assets prior to distribution.