Is it legitimate to use the MVL or CVL process for the intended effect of tax avoidance? (Re PAG Asset Preservation Ltd and another company)

Is it legitimate to use the MVL or CVL process for the intended effect of tax avoidance? (Re PAG Asset Preservation Ltd and another company)

The court was concerned with public interest winding-up petitions presented against companies which operated schemes to help customers to avoid liability for business rates. The schemes involved the setting up of special purpose vehicles (SPVs) which would accept liability in principle for business rates in respect of a property, and which would shortly afterwards be placed into members’ voluntary liquidation (MVL), thus exempting them from liability for business rates. While the schemes were artificial, they were nevertheless genuine and legally effective. The court held that there was nothing objectionable against companies which operated such tax avoidance schemes. Oberon Kwok, barrister at Selbourne Chambers, considers the judgment, the background to the case and the practical implications.

PAG Asset Preservation Ltd—MB Vacant Property Solutions Ltd [2019] EWHC 2890 (Ch)

What are the practical implications of this case?

This case demonstrates that it is legitimate to use the MVL or creditors’ voluntary liquidation (CVL) process for the intended effect of tax avoidance, as long as the objective purpose of the liquidation does not stray from the collection, realisation and distribution of assets. Provided that is the case, the courts are unlikely to strike down such arrangements.

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About the author:

Zahra started working as a paralegal at Lexis Nexis in Banking and Insolvency teams in April 2019. Zahra graduated with a 2.1 honours in a BA French and Spanish, completed the GDL at BPP University and is seeking some experience before commencing the LPC. She has undertaken voluntary work for law firms in London, Argentina and Colombia.