By John Bell, Senior Partner, Clarke Bell
A client approaching retirement tells their financial adviser that their limited company has £350,000 in the bank. They intend to close the business and use the proceeds to help fund their retirement.
It sounds like a straightforward addition to their financial plan. But how much of that money will actually reach the client, when will it become available, and what tax will they pay?
These are important questions for paraplanners supporting business-owning clients through retirement or succession. A Members’ Voluntary Liquidation (MVL) can provide a tax-efficient way to close a solvent company, but the process needs to be coordinated with the client’s wider financial arrangements.
Our recent analysis of 21,839 MVL resolutions found 604 in the five working days before the April 2025 increase in Business Asset Disposal Relief (BADR), compared with 39 afterwards. The equivalent figures around April 2026 were 673 and 44.
Activity also rose around the April 2024 tax year-end, when BADR rates were unchanged, although the increase was considerably smaller.
The research measures resolution dates rather than individual tax decisions, but it highlights how concentrated company closures can become around particular deadlines.
For paraplanners, the priority is to ensure that the client’s exit plans, tax position and retirement assumptions are properly aligned.
Establish whether the client is ready to close
Before incorporating liquidation proceeds into a financial plan, the advice team needs to understand what the client intends to do with their business.
Are they retiring completely, selling to another shareholder or planning to continue similar work? Is the company still trading, and are there outstanding contracts or liabilities?
An MVL is a formal process for winding up a solvent company, overseen by a licensed insolvency practitioner. Once liabilities have been settled, surplus assets can be distributed to shareholders, generally with capital rather than income tax treatment.
For owners who have genuinely finished trading and accumulated substantial profits, this can be an attractive option. Others may be better served by retaining the company, arranging succession or selling the business.
The distinction matters because the financial plan should reflect the client’s intended exit, rather than assume that liquidation is inevitable.
Check the tax treatment before relying on the figures
BADR can make an MVL particularly attractive, but eligibility should never be assumed. For qualifying disposals from 6 April 2026, BADR provides an 18% Capital Gains Tax rate, subject to a £1 million lifetime limit on qualifying gains.
For share disposals, the qualifying conditions generally include holding at least 5% of the company’s ordinary share capital and voting rights, satisfying an additional economic interest test, being an employee or office holder, and meeting the trading-company requirements over the relevant two-year period.
Previous relief claims and the timing of any cessation of trading may also affect eligibility.
These are matters for the client’s accountant or tax adviser to confirm before the financial planning team relies on an estimated net distribution.
There’s also an important distinction between the liquidation date and the tax disposal date. Passing a resolution to wind up a company doesn’t, by itself, establish when the shareholder’s capital gain arises.
Under HMRC’s guidance on capital distributions, the relevant date is generally when the shareholder receives or becomes entitled to the distribution.
Don’t treat company cash as retirement cash
A healthy company bank balance doesn’t necessarily mean the same amount will be available to the shareholder.
Corporation Tax, VAT, outstanding creditors and professional fees may still need to be paid. There could also be unresolved director’s loan accounts, unpaid client invoices or liabilities that require funds to be retained.
An MVL can allow shareholders to receive distributions before the company is formally dissolved, but the timing and amounts will depend on the circumstances.
This is particularly important where a client expects liquidation proceeds to replace their employment or business income immediately after retirement.
What happens if the first distribution is smaller than expected, or arrives six months later than anticipated?
Paraplanners can help advisers test these scenarios rather than relying on a single projected payment date. The client may need sufficient accessible funds to cover expenditure while the liquidation progresses.
As Professional Paraplanner has previously explored in its coverage of cash-flow modelling, the accuracy of the underlying assumptions is central to producing a useful financial plan.
The eventual proceeds should also be considered alongside pensions, investments and estate-planning objectives.
This is particularly relevant for business owners who have treated their company as their main retirement asset. Previous research found that three in ten business owners had no pension independent of their business.
5 questions before finalising the financial plan
When supporting a client approaching a solvent company exit, ensure the advice team can answer five questions.
1. Has the client decided to stop trading? Establish whether retirement, succession, sale or continued business activity is the intended outcome.
2. Has the tax position been confirmed? Obtain specialist advice on BADR eligibility, potential liabilities and the expected treatment of distributions.
3. Is the company’s financial position clear? Request up-to-date accounts, outstanding liabilities, shareholder details and an estimate of the surplus available.
4. When might distributions be made? Discuss the likely timetable with the insolvency practitioner and establish whether payments could be staged or delayed.
5. Does the wider financial plan still work? Test how changes to the expected amount and timing would affect retirement income, liquidity and longer-term objectives.
Paraplanners aren’t responsible for determining tax eligibility or managing the liquidation. Their contribution is to identify the information needed, challenge assumptions, and help the financial adviser coordinate with the client’s accountant, tax adviser and insolvency practitioner.
For many business owners, an MVL can provide an effective conclusion to years of running a successful company. With proper coordination, the proceeds can also be an important part of their financial future.
The key is planning the business exit and the client’s retirement together, rather than treating liquidation as a separate transaction.
Main image: business meeting, hands, desk, olena-kholina-MhqUBTxQ3Hw-unsplash
