Lib Dem mayoral candidate Simon Hughes

Participants in this year's London marathon will run the first four miles for the taxman, Simon Hughes has warned.

A parliamentary written answer to the Liberal Democrat mayoral candidate from the Treasury has revealed that sponsorship payments made to charities in exchange for free entry to the race are subject to VAT at 17.5 per cent.

"Charities and their donors in the UK will benefit from a wide range of VAT reliefs and exemptions," said economic secretary John Healey.

"In accordance with the requirements of the EU directives on which UK VAT law is based, sponsorship raised by runners for organisations who have paid for places in the London marathon is free from VAT. 

"However, any payment requred in exchange for a place is subject to VAT and consequently an organisation may be able to reclaim some of the VAT it incurs in providing this service."

Peter Ladanyi of the chartered accountancy firm Chantrey Vellacott DFK told the BBC that while the rules have been in place for the past four years, the government is now ensuring they are enforced.

"It is a policy that has been enforced more vigorously perhaps over the last few years and it is a policy which Customs would appear to be actually stating in their revised guidance," he told the Radio 4 Today programme on Thursday.

"It is not a new thing but it is something, perhaps, which they are laying a greater stress on."

Hughes described the move as "outrageous".

"It is scandalous that runners in the marathon who thought that all their hard earned cash would be going to good causes is being creamed off by the chancellor," he said.

"Many thousands of runners on Sunday will have trained for months, safe in the knowledge the money they raised in good faith would be going straight to their nominated charity.

"But the Treasury is set to run off with millions of pounds donated to help the most vulnerable in society.

"It is outrageous that VAT will strip charities of cash for good causes because the Treasury refuses to close a ludicrous anomaly in the law.

"Gordon Brown must act urgently to close this loophole, ensuring that charitable donations given by marathon runners remain exempt from VAT."