£5m tax on Marathon runners

Gordon Brown is to tax up to £5million from thousands of London Marathon runners in a controversial attack on charitable donations, it has emerged.

The Treasury will benefit from a move by Customs and Excise to tax thousands of runners' sponsorship money at the VAT rate of 17.5 per cent.

In an unprecedented step, tax inspectors will this year invoke little-known powers to demand VAT from charities who pay a socalled "golden bond" 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.

Peter Reynolds, director of fundraising for Breakthrough, the 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. "I think supporters would feel very disappointed that their donations were benefiting the taxman."

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.

Mr Hughes said it was scandalous that runners' hardearned cash "is being creamed off by the Chancellor".

Tax experts at accountancy firm Chantrey Vellacott DFK estimated the VAT bill for this year's marathon would be about £5million.

The Flora London Marathon, which attracts 33,000 runners, is highly lucrative for Britain's largest charities. Organisers believe runners will this year raise a total of £36million.

Under the "golden bond" scheme, charities must pay £250 to guarantee a place in the race for five years - meaning they must raise at least £125,000 before they see any profit.