Investment Clubs Manual070

Investment Clubs Manual070 - 60 October 2008 TAXATION...

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Unformatted text preview: 60 October 2008 TAXATION ISSUES Let us make it very clear — investment clubs are not constituted as companies and are therefore not subject to Corporation Tax. They belong to their members and for their members’ benefit. All profits and losses are directly attributable to the individual members. Individuals are required by law to disclose all income and capital gains to the Inland Revenue. Money made via an investment club is not exempt from this requirement and it is necessary for each member to declare his/her share of the club profits on his/her individual tax return. The two taxes that will affect investment club members are capital gains tax (CGT) on any profits the club makes and income tax on dividends paid by the companies In which the club holds shares. The first step to be taken by new investment clubs is to notify their local Inland Revenue Office of their existence. In due course you will receive an invitation to make returns for your club In the way the IR has devised and when you confirm your acceptance of the method you will be sent copies of the appropriate forms. The Standard Form of Agreement and Form 165 (New). Even if your club has not made a capital gain in the year, it Is wise to report to the Inland Revenue at the end of each tax year. There will probably be dividend income to declare and keeping in touch with the Revenue means that your members will not have any nasty surprises. Apportioning gains and income You may well have different members paying different amounts each month or have had new members join throughout the year, which can complicate matters slightly. One of the tasks to be undertaken by the club treasurer at the end of each year is to apportion the club's gains and income amongst the members. The Revenue will normally accept any reasonable method that the club chooses to employ, providing that it is equitable, ore-determined and not designed to manipulate tax liability. One acceptable method is to keep a table of‘month units: that is the number of units held by each member in each month of the year. At the end of the year each member’s total month units are totalled and related to the total of the club's 'month units’ over the year to provide a percentage liability for each member. ProSha re Investment Club THE MANUAL ...
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