Real Business Rescue – Your Guide to Saving or Closing a Company
26th February 2025
This guide explains how IR35 affects limited company contractors and how Umbrella.UK Insolvency can help you close your solvent company in a tax-efficient way
If you’re an IR35 contractor, you may have found yourself facing the challenges of IR35 legislation. Whether you’re a contractor, freelancer, or business owner operating through your own limited company, the IR35 tax rules have likely had an impact on your financial situation. For those caught by IR35, closing a solvent company can be complicated, but with expert help, it’s possible to do so in the most tax-efficient way. At Umbrella.UK Insolvency, we provide tailored solutions for an IR35 contractor looking to exit their business responsibly.
What is IR35 legislation?
IR35, or the “off-payroll working” rules, aim to ensure that contractors who would be considered employees if it weren’t for their limited company structure pay similar taxes to permanent employees. These rules have caused many contractors to reassess their business models, as being deemed “inside IR35” can lead to higher tax and National Insurance contributions.
For further details on the IR35 legislation, visit the official UK Government page on IR35 to stay informed about how it may affect you.
Why you might need to close your company
If you’re an IR35 contractor and are finding that working through your limited company is no longer financially viable, closing it may be the best option. The new IR35 rules have made it harder for many contractors to operate through their own companies, leading them to consider liquidating their business.
An MVL (Members’ Voluntary Liquidation) can be a highly tax-efficient solution for solvent companies, allowing contractors to wind up their businesses while making the most of available tax reliefs.
What is an MVL (Members’ Voluntary Liquidation)?
An MVL is a process that allows directors of solvent companies to close their business in an orderly, legal manner. If your company is solvent (i.e., it can pay its debts), you can distribute its assets to yourself in a way that is more tax-efficient than taking the money as income.
In an MVL, the company’s assets are distributed to shareholders (typically the contractors themselves), and the liquidation process ensures that all legal requirements are met, while minimising the tax liabilities. This is often the best option for IR35 contractors who wish to retire or move on from their business.
Why should you use a professional Insolvency Practitioner?
While it may seem tempting to handle the liquidation process on your own, it’s crucial to involve a professional insolvency practitioner. These experts have the knowledge to guide you through the complex process, ensuring that you comply with all legal and tax regulations. By using a professional insolvency practitioner, you can avoid costly mistakes and make sure your MVL is carried out in the most tax-efficient way possible.
Tom Fox, Head of Insolvency at Umbrella.UK Insolvency, explains: “For IR35 contractors, an MVL is often the best way to close a solvent company in a tax-efficient manner. We understand the specific challenges contractors face, and we tailor our services to ensure that all legal and financial aspects are handled correctly, giving you peace of mind.”
Case study 1 – The IT contractor who retired early
A successful IR35 contractor working in the IT sector decided to retire after over 25 years of running a limited company. He had been operating within IR35 for the past few years, which had reduced his take-home pay significantly. After speaking to Umbrella.UK Insolvency, he decided to close his business using an MVL.
By opting for an MVL, he was able to distribute his company’s assets to himself in a highly tax-efficient way, reducing his tax liabilities considerably compared to taking the money as income. The process was smooth, stress-free, and completed within a few months, allowing him to retire comfortably.
Case study 2 – The freelance contractor who moved on to a permanent role
A freelance IR35 contractor in the engineering industry had worked for several years with multiple clients. However, after the new IR35 legislation came into effect, he realised the financial burden of operating his limited company had become unsustainable. With no plans to continue freelancing, he sought advice from Umbrella.UK Insolvency.
Through an MVL, he was able to close his business and distribute the assets to himself in a tax-efficient manner, reducing his liabilities. The whole process was overseen by our professional insolvency team, ensuring compliance with all regulations. He was able to focus on his new permanent role, with the peace of mind that his company was closed properly.
The benefits of an MVL for an IR35 contractor
- Tax efficiency – Distribute your company’s assets in the most tax-efficient way possible, making use of Business Asset Disposal Relief (formerly Entrepreneurs’ Relief), which can reduce Capital Gains Tax.
- Clear exit strategy – If you’re looking to retire or move on from your business, an MVL provides a structured and legal way to close your company.
- Avoiding personal liability – With an MVL, you avoid any concerns about personal liability, as long as your company is solvent, and all debts are paid.
- Peace of mind – Using an experienced insolvency practitioner ensures that the entire process is handled with expertise and compliance, giving you peace of mind.
Why choose Umbrella.UK Insolvency for your MVL?
At Umbrella.UK, we specialise in helping IR35 contractors close their companies in the most tax-efficient way. Our professional team has years of experience guiding contractors through the MVL process, ensuring they receive the maximum benefit from the liquidation.
- Personalised Director-led advice tailored to your needs.
- Over 20 years of insolvency experience.
- Cheshire-based office with nationwide coverage.
- Free initial consultation to help you explore your options.
Take control of your future today
If you’re an IR35 contractor looking to close your solvent company, don’t face it alone! 📞Contact Umbrella.UK Insolvency for a free initial, confidential consultation and let our team help you navigate the MVL process. We’ll ensure you take the right steps to protect your financial future.