Investment clubs: what happens when a member leaves?
When a member leaves a club, they withdraw the whole of their investment. This may give rise to chargeable gains or allowable losses. But when calculating the gains or losses on the disposal of their investment in the club, it is necessary to take into account the fact that they may have had income, gains or losses attributed to them over the period of their membership, without the actual income or gains being distributed to them. So the calculation of the chargeable gains or allowable losses when they leave the club must be adjusted for these items.
When leaving the club, the member disposes not only of their interest in the clubs investments, but also of their rights as a member. Any gain on leaving a club is treated as a gain on the disposal of those rights.
The club may have to sell assets to provide the funds to distribute to a member who is leaving. The gains or losses on these disposals should be allocated among all the members, including the departing member.