If a charity asks individuals to “pledge” or “commit” to raise a certain amount of sponsorship but does not insist on any payment before allowing the individual to take part in the event, the total amounts raised can be treated as donations and outside the scope of VAT. A charity can encourage individuals to pass on sponsorship money as they receive it but cannot insist on receiving a certain amount before allowing the individual to take part, as that would make the amount subject to VAT.

Charities can choose to charge a registration fee of a fixed amount and then invite additional sponsorship and include a suggested level for this. The registration fee is taxable at the standard rate whereas the sponsorship is a donation outside of the scope of VAT. Where this occurs the charity will be entitled to reclaim the VAT it incurs on related expenses (e.g. VAT on Gold Bond places for the London Marathon.)