Probe into £5m Marathon tax

Last updated at 17:22 15 April 2004


The Treasury has ordered an urgent investigation into claims that thousands of London Marathon runners are facing VAT on the money they raise for charity.

The urgent move, only days before the big race this Sunday, came after tax experts warned that new guidelines could see Customs and Excise benefiting by up to £5 million by imposing a VAT rate of 17.5 per cent on some donations.

In an unprecedented step, tax inspectors will this year invoke little-known powers to demand VAT from charities who pay a socalled "golden bondî of £250 per entrant to guarantee places for sponsored runners.

It has caught most "golden bond" runners and charities by surprise, but Customs and Excise defended the scheme, arguing that the £250 payment effectively constituted an entry fee, which was therefore liable to VAT.

But Treasury sources told the Evening Standard today that they would look into the allegations and possibly find a way to help charities avoid any unreasonable costs.

A Treasury spokesman insisted, however, that claims that all charitable money raised would be subject to VAT were "misleading".

Peter Reynolds, director of fundraising for Breakthrough, a leading breast cancer charity, said the tax could cost it up to £45,000. "We believe it is extremely unfair to levy VAT on individual donations," he said.

The plan was revealed in a House of Commons written answer to Simon Hughes, the Lib- Dem candidate for London Mayor, in which the Government said "any payment required in exchange for a place is subject to VAT".

Charities may apply for a refund, but the authorities are not required to pay.

Tax experts at accountancy firm Chantrey Vellacott DFK estimated the VAT bill for this marathon would be about £5 million. Marathon organisers believe runners will this year raise a total of £36 million.

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