UK University Student Society - Stocks and Shares

investment_soc

Hi,

I would like to set up a stocks and shares investment society at my university. The aim of the society is to give away profits to good causes after a 3 - 5 year period.

I am in need of advice regarding which broker would be ideal for this kind of philanthropic investment society?

Thank you for your time and help.

masonic

Several of the cheap online services allow investment club applications. Which one you pick will depend on where/how you want to invest. If it's just in LSE listed shares, then something like X-O might be suitable, for example.

investment_soc

Thanks for your advice masonic.

How do you think I should approach the tax side of things with this society? From my research, HMRC tax each member of an investment club individually on profits received. However, my idea of all proceeds being given away to good causes at some point do not meet this requirement. I am a little confused on how to set up the student society to avoid such taxes on individuals as they will not be the ones receiving such profits.

Thanks.

masonic

I'm not sure if this is the best way to do it, but you could (if you end up being liable for any capital gains tax) donate the affected gains using gift aid. It's worth pointing out that there is a £11,000 CGT allowance you would need to each use up before this would be a consideration.

alanq

investment_soc wrote: »

The aim of the society is to give away profits to good causes after a 3 - 5 year period.

Just the profits not the initial capital? What if there are no profits after paying for administration charges? What size of fund is envisaged? 3-5 years is not long for an investment.

Why not let individuals make their own investments and donations, deposit the funds with a charitable bank or donate directly to chosen charities and let them decide how to spend or invest the donations? Having a group investing will require a bureaucracy to make decisions where to invest and which charities to support. It seems to me that this idea will cause more hassle than it's worth.

investment_soc

Hi alanq,

Thanks for your response. I agree that a group will require some form of bureaucracy, but I believe part of this is needed to allow for a student society to become involved with all forms of investing in stocks and shares and charitable donations.

If there are no profits then there will be no donations to charities. I still think this is idea could work over the long term, especially as students will only be at uni for 3-4 years.

The idea is that students join the society paying a one time fee of £5. This subscription fee will then be used to invest after decisions have been made by all members. Then left for 3-5 years. The whole process would then be repeated each academic year. Hopefully, profits will be made and then charitable donations will be made.

My concern at the moment is with tax. As I am unsure how to approach this issue considering that members will not be receiving any profits, only charitable donations will be made after admin fees. Any advice regarding this would be greatly appreciated.

Thanks.

masonic

investment_soc wrote: »

The idea is that students join the society paying a one time fee of £5. This subscription fee will then be used to invest after decisions have been made by all members. Then left for 3-5 years. The whole process would then be repeated each academic year. Hopefully, profits will be made and then charitable donations will be made.

Surely they would need to do more than just pay a £5 fee? Where is the investment capital going to come from and how much per person is going to be invested? If people are going to be joining and leaving the scheme each year, this could get very complicated.

My concern at the moment is with tax. As I am unsure how to approach this issue considering that members will not be receiving any profits, only charitable donations will be made after admin fees. Any advice regarding this would be greatly appreciated.

Supposing you have 10 people and each person contributes £1000 of capital (which I think is probably more than would happen in this situation), then you would have £10,000 to invest. Unless you turn this £10,000 into more than £110,000 and then sell the investments in one go, there will be no tax liability unless members are making capital gains outside of the scheme. There would also be no tax liability on dividend income unless any of the members were higher rate taxpayers (which I'm assuming, as students, they wouldn't be).

Maybe it would be worth you reading HMRC's FAQ on investment clubs.

Eco_Miser

investment_soc wrote: »

The idea is that students join the society paying a one time fee of £5. This subscription fee will then be used to invest after decisions have been made by all members. Then left for 3-5 years. The whole process would then be repeated each academic year. Hopefully, profits will be made and then charitable donations will be made.

At £5 a member, you will need thousands of members to raise a sum worth investing, and 3-5years is too short a period. Are you intending repaying each £5?

I think you would be better to constitute your society as a charity whose purpose is to distribute its investment income to other charities (don't know what legalities would be needed, but know it can be done), take a £5 no-refundable donation from each member, keep all the donations invested and distribute the dividends. Over time your society could become a major benefactor.

However I'm not sure what the membership will get from it, either your original idea, or my variation.

jimjames

To avoid costs eating too much of your investment you'd ideally be looking at £1000 per share you buy. And to split the risk you'd ideally need 10 different investments so that's £10,000.

At £5 each you'll need 2000 to sign up. Even if you go with 5 shares that's still 1000 students.

It's a great idea to get more knowledge of shares and investment but as above I'm not sure what the participants will get from it. The one thing you don't need to worry about is tax if they're putting in a fiver.

masonic

jimjames wrote: »

At £5 each you'll need 2000 to sign up. Even if you go with 5 shares that's still 1000 students.

That's an interesting view of the idea. I was approaching it as a small group of people interested in learning about investing, who happen to want to donate their profits to charity. If, however, this is to be a mass marketed society where a large number of people pay a fiver, but don't really take an interest in the investments after that, then I'd say they'd be better off just donating a fiver directly to charity.

jimjames

masonic wrote: »

That's an interesting view of the idea. I was approaching it as a small group of people interested in learning about investing, who happen to want to donate their profits to charity. If, however, this is to be a mass marketed society where a large number of people pay a fiver, but don't really take an interest in the investments after that, then I'd say they'd be better off just donating a fiver directly to charity.

I agree it makes far more sense to be a smaller group. But at £5 each as the stated investment if you had even 20 people you'd only have £100 to invest. Take out fees and I think the chance of any profit is minimal.

I think 20 people putting in £5 or £10 per month would start to be a viable proposition.