ICAS ICAS logo

Quicklinks

  1. About Us

    Find out about who we are and what we do here at ICAS.

  2. Find a CA

    Search our directory of individual CAs and Member organisations by name, location and professional criteria.

  3. CA Magazine

    View the latest issues of the dedicated magazine for ICAS Chartered Accountants.

  4. Contact Us

    Get in touch with ICAS by phone, email or post, with dedicated contacts for Members, Students and firms.

Login
  • Annual renewal
  • About us
  • Contact us
  • Find a CA
  1. About us
    1. Governance
  2. Members
    1. Become a member
    2. Newly qualified
    3. Manage my membership
    4. Benefits of membership
    5. Careers support
    6. Mentoring
    7. CA Wellbeing
    8. More for Members
    9. Area networks
    10. International communities
    11. Get involved
    12. Top Young CAs
    13. Career breaks
    14. ICAS podcast
    15. Newly admitted members 2022
    16. Newly admitted members 2023
  3. CA Students
    1. Student information
    2. Student resources
    3. Learning requirements
    4. Learning updates
    5. Learning blog
    6. Totum Pro | Student discount card
    7. CA Student wellbeing
  4. Become a CA
    1. How to become a CA
    2. Routes to becoming a CA
    3. CA Stories
    4. Find a training agreement
    5. Why become a CA
    6. Qualification information
    7. University exemptions
  5. Employers
    1. Become an Authorised Training Office
    2. Resources for Authorised Training Offices
    3. Professional entry
    4. Apprenticeships
  6. Find a CA
  7. ICAS events
    1. CA Summit
  8. CA magazine
  9. Insight
    1. Finance + Trust
    2. Finance + Technology
    3. Finance + EDI
    4. Finance + Mental Fitness
    5. Finance + Leadership
    6. Finance + Sustainability
  10. Professional resources
    1. Anti-money laundering
    2. Audit and assurance
    3. Brexit
    4. Charities
    5. Coronavirus
    6. Corporate and financial reporting
    7. Business and governance
    8. Ethics
    9. Insolvency
    10. ICAS Research
    11. Pensions
    12. Practice
    13. Public sector
    14. Sustainability
    15. Tax
  11. CPD - professional development
    1. CPD courses and qualifications
    2. CPD news and updates
    3. CPD support and advice
  12. Regulation
    1. Complaints and sanctions
    2. Regulatory authorisations
    3. Guidance and help sheets
    4. Regulatory monitoring
  13. CA jobs
    1. CA jobs partner: Rutherford Cross
    2. Resources for your job search
    3. Advertise with CA jobs
    4. Hays | A Trusted ICAS CA Jobs Partner
    5. Azets | What's your ambition?
  14. Work at ICAS
    1. Business centres
    2. Meet our team
    3. Benefits
    4. Vacancies
    5. Imagine your career at ICAS
  15. Contact us
    1. Technical and regulation queries
    2. ICAS logo request

Tax clearance for MVLs

  • LinkedIn (opens new window)
  • Twitter (opens new window)
Steven Wood By Steven Wood, Practice Support Specialist (Insolvency)

19 January 2023

  • IPs have expressed frustration at continuing delays being experienced in relation to tax clearance for MVLs.
  • Obtaining tax clearance has some risk mitigation benefits but may not always be necessary.

Frustration with HM Revenue & Customs (HMRC) service levels is nothing new, with ICAS Members reporting ongoing problems throughout 2022.

Specifically, in relation to insolvency, ICAS has been contacted by several insolvency practitioners (IPs) who it licences in recent months, expressing their irritation at continuing delays being experienced in relation to tax clearance for members voluntary liquidations (MVLs).

MVLs are solvent liquidations which can be a tax-efficient way for shareholders to be repaid their capital from a business that is closing. IPs have normally sought clearance from HMRC that there are no outstanding matters that would prevent the company from being dissolved prior to paying the final distribution to shareholders. As a result, any delays to that clearance can lead to IPs fielding enquiries from shareholders keen to receive the money they are entitled to.

HMRC provided updates in September and November 2022 on this issue, and is understood to be currently undertaking a wholesale review of its MVL process, including the provision of tax clearance. However, for now, it is clear that most IPs are still experiencing significant delays.  Unfortunately, this issue may be further exacerbated by a potential short-term spike in MVL numbers prior to upcoming changes to the CGT annual exempt amount in April this year.

The Practice Support team at ICAS has suggested on several occasions when discussing HMRC tax clearance delays with individual IPs that, subject to certain safeguards being in place, they may proceed to close a MVL case without obtaining the tax clearance from HMRC. The Practice Support team has also discussed the position with the regulatory monitoring team. This article sets out that position in order that all IPs have visibility of the advice and can consider the most appropriate approach to adopt within their practice policies and procedures.

While it is common practice among IPs to obtain tax clearance prior to making a final distribution and closing MVL cases, there is no legislative or stated best practice requirement to do so. Indeed, in view of the indemnity that the IP is likely to have in place with the shareholders and the heavily caveated terms in which HMRC frame clearance letters, the value of obtaining tax clearance is open to some debate.

Tax clearance requests would normally cover both the pre-appointment and post-appointment period. Clearly, the IP should be fully aware of the tax position post-appointment and be able to ascertain with confidence that they have submitted all post-appointment tax returns and information necessary to HMRC and that any liabilities due to HMRC have been paid.

The pre-appointment tax position provides a less certain environment for the IP as they have no direct knowledge or control over the company and its affairs during that period. As a result, the possibility of unknown liabilities existing is higher and the risks of making payments to shareholders beyond that to which they are entitled to is higher.

However, if appropriate enquiries have been made with the company and HMRC has been given an opportunity to submit a claim following the procedures set out within insolvency legislation, then it is open to an IP to close the MVL without tax clearance, subject to their (and their firm’s) professional judgement of the risk.

Those enquiries may include:

  • Suitable enquiries of the company’s directors and its previous accountant.
  • The IP evidencing that all tax returns have been submitted and payment made of any tax due.
  • Ensuring that any claims received/liabilities due to HMRC based on assessments have not been or will not be appealed and are legally due.

Many IPs will understandably still prefer to err on the side of caution, particularly where there may be more complex tax situations to deal with and where the tax treatment of certain matters is less certain. However, this guidance will hopefully provide some comfort to any IPs who intend to go down the route of closure without HMRC clearance. As always, it is vitally important that all decision-making is fully documented.


Subscribe to the ICAS Insolvency Technical Update

Technical updates

ICAS' work to improve HMRC service levels and systems

By Susan Cattell, Head of Tax Technical Policy

16 December 2022

2022-01-xero 2022-01-xero
ICAS logo

Footer links

  • Contact us
  • Terms and conditions
  • Modern slavery statement
  • Privacy notice
  • CA magazine

Connect with ICAS

  • Facebook (opens new window) Facebook Icon
  • Twitter (opens new window) Twitter Icon
  • LinkedIn (opens new window) LinkedIn Icon
  • Instagram (opens new window) Instagram Icon

ICAS is a member of the following bodies

  • Consultative Committee of Accountancy Bodies (opens new window) Consultative Committee of Accountancy Bodies logo
  • Chartered Accountants Worldwide (opens new window) Chartered Accountants Worldwide logo
  • Global Accounting Alliance (opens new window) Global Accounting Alliance
  • International Federation of Accountants (opens new window) IFAC
  • Access Accountancy (opens new window) Access Acountancy

Charities

  • ICAS Foundation (opens new window) ICAS Foundation
  • SCABA (opens new window) scaba

Accreditations

  • ISO 9001 - RGB (opens new window)
© ICAS 2022

The mark and designation “CA” is a registered trade mark of The Institute of Chartered Accountants of Scotland (ICAS), and is available for use in the UK and EU only to members of ICAS. If you are not a member of ICAS, you should not use the “CA” mark and designation in the UK or EU in relation to accountancy, tax or insolvency services. The mark and designation “Chartered Accountant” is a registered trade mark of ICAS, the Institute of Chartered Accountants of England and Wales and Chartered Accountants Ireland. If you are not a member of one of these organisations, you should not use the “Chartered Accountant” mark and designation in the UK or EU in relation to these services. Further restrictions on the use of these marks also apply where you are a member.

ICAS logo

Our cookie policy

ICAS.com uses cookies which are essential for our website to work. We would also like to use analytical cookies to help us improve our website and your user experience. Any data collected is anonymised. Please have a look at the further information in our cookie policy and confirm if you are happy for us to use analytical cookies: