Generally speaking investment clubs comprise a group of friends, neighbours or work colleagues who meet together on a regular basis, pooling their spare cash to buy and sell shares on the stock market.
Investment clubs are not charged to Corporation Tax. The individual member is charged to tax on their proportionate share of any income or gains and is entitled to relief in respect of any share of capital losses.
HM Revenue & Customs (HMRC) has no rules about who can and can’t be a member of an investment club. However, the tax rules in the overseas country where the investor is resident may not be the same as in the UK. Non-resident members should check for themselves the tax situation locally.
Yes. The club should have a constitution and rules, to provide an organisational framework and points of contact for correspondence and official notices. A constitution is also essential to protect the interests of club members.
HMRC is unable to offer a model constitution and rules or to give advice on drawing these up. It is a legal matter and not within our remit.
The Treasurer, Secretary or other official of the club should notify HMRC when the club is set up and the address which HMRC should use for official correspondence. All correspondence should be addressed to HM Revenue & Customs, PO Box 4000, Cardiff, CF14 8HR and marked ‘Investment Club' HMRC will issue the appropriate letters and forms along with a unique reference number that should be quoted in all further correspondence.
An appointed club officer, normally the Treasurer, will be responsible for keeping a record of the clubs dealings in stocks and shares. He or she will apportion any income, gains and losses between the members in accordance with the rules of the club, and should provide each member with a written statement of these for each tax year.
Every club member should declare their apportioned share of income or gains received from investments made by the club on their Self Assessment Tax Return.
However, a member does not have to declare their share of investment club gains to HMRC revenue if:
Yes, club members will be chargeable to tax on gains whether such gains are retained by the club for re-investment or distributed to club members.
If you do this, you could incur an immediate tax liability if the value of the shares has gone up since you originally acquired them. This is because the transfer to the club is treated as a disposal of an interest in the shares to the other club members, because you would no longer own the shares absolutely, but would own them jointly with the other club members. The shares would have to be valued at the transfer date to establish the amount of your gain or loss for tax purposes.
When you leave, the club will pay you the value of your share of the club's investments. And the occasion of your departure represents a disposal of your share of those investments for Capital Gains Tax purposes. To calculate the chargeable gain on this occasion, you will need to deduct from the amount you receive from the club the total of:
No. The Revenue has no rules regarding the nature of the investments made by such a club. Generally, funds are invested on the London Stock Exchange, but they can also be invested in other assets, including foreign shares and securities, or they can be held on deposit in a bank account.