There is much concern about the proposed new rules from HM Revenue & Customs regarding Members’ Voluntary Liquidations (MVLs). The Government’s proposals are that from 6 April 2016, distributions on a solvent winding up of a limited company will be treated as income rather than capital if within two years the shareholder starts up a similar company and it is reasonable to assume that the main purpose of the MVL is to pay less income tax.

While there is a feeding frenzy going on, with many company owners considering winding up before the 6 April deadline, this may be because there is a misapprehension that Entrepreneurs’ Relief is also being scrapped. However, this is not so: the proposed measures will not affect bona-fide business owners winding up (or selling) a trading company at the end of its useful life. Those who take such a long-term view will still benefit from a 10 per cent tax rate on capital gains up to a lifetime limit of £10m.

Take the short term tax saving motive out of the equation and there is really no need to panic. There are also many commercial reasons why it is not prudent to liquidate a company. Not only is there the sheer hassle of closing a company, changing bank accounts, making employees redundant and informing customers, it doesn’t do much for stability. There is the bigger picture: there may be pre-qualification criteria for tendering on more profitable or more prestigious contracts that entrepreneurs will find harder to meet because they are not building up a track record by starting from scratch every couple of years. Also, when it comes to accessing funding, which is hard enough in any case, is this the best way of presenting a serious business with a healthy future?

It is worth looking at the big picture from a commercial perspective rather than the short-term tax advantage. Those who keep chopping and changing miss out on useful and tax efficient remuneration structures such as share option schemes – a handy way of incentivising staff over the longer term, tying them in and rewarding success. Such schemes work well if you don’t have much cash to pay salaries as it is usually tied in with a transaction that will happen in the future, and they’re actively supported by Government policy

As with most Anti-avoidance legislation, there will be some genuine casualties if the proposed legislation comes into law in its current form. Property special purpose vehicles (SPVs), established for specific projects and then liquidated to access the money, will be hit hard. This could be a real issue for property developers or their investors if they are caught by the rules.

Whatever your business, it is worth taking a long-term view when considering how you exit the company eventually and how your staff are rewarded in the meantime and I strongly recommend seeking advice to ensure you have a plan in place to deal with any changes that are coming.