Investment clubs are loosely defined as a group of people who get together to buy and sell shares on the stock market with a view to making a profit. An investment club does not have any special legal status and usually operates as a kind of informal partnership. These clubs can offer an interesting perspective to investors helping to hone their skills, share risk and benefit from new fonts of knowledge.
HMRC publishes special guidance as to how gains and losses should be handled as part of an investment club. The person who runs the club must prepare an annual statement of the club's gains and losses. This is known as an 'Investment club certificate'. This document lists each person’s share of any capital gains or losses.
The investment club treasurer or secretary should also:
- divide any income, gains and losses between its members according to the club’s rules
- keep records including members’ income and gains
- arrange to buy shares from members who want to leave the club
If you are starting a new investment club, you should make sure it has a constitution and rules.