Charities face £5m VAT marathon hit
Runners in this weekend's London Marathon could face a combined tax bill of up to £5m, with Customs and Excise expected to charge charitable donations at the VAT rate of 17.5%.
Link: VAT exemption boost for London marathon
This year Customs is to invoke little-known powers to charge VAT on charities that pay a ‘golden bond’ of £250 per entrant to guarantee places for their runners, according to the London Evening Standard.
It is a bitter blow for charities, who were banking on raising even more money from this year’s race after it was revealed that all money raised from sponsored runners would be VAT free.
The golden bond scheme guarantees charities a place in the race for five years, but Customs and Excise has argued that the £250 ‘bond’ effectively constitutes an entry fee and it therefore subject to VAT.
Accountancy firm Chantry Vellacott DFK has estimated that the VAT bill for this year’s scheme will be around £5m. Breast cancer charity Breakthrough said the tax will cost it up to £45,000 and said it planned to challenge Customs’ decision.