Widespread concerns that linking a charity’s gift aid record to its ability to claim grants from the Gift Aid Small Donations Scheme will disadvantage small charities were overruled by government, which has argued that the measures are necessary to combat fraud.

The Small Charitable Donations Bill, which will enable charities to claim gift aid-style grants (rather than tax relief) on small donations of up to £5,000, was heralded at its inception as enabling small charities to leverage their donations as large charities do.

The report on the consultation about the Bill, which was introduced in June, however, found that many charities shared the concerns voiced by sector leaders about the scheme and fear the bureaucracy involved could deter small charities from utilising the scheme.  

The research paper on the Bill, released by the government this week, revealed that two aspects of the proposed scheme caused charities particular consternation: that the amount a charity can claim from the Gift Aid Small Donations Scheme cannot exceed double the amount they claim in gift aid; and that only charities and community amateur sports clubs which have successfully made gift aid claims in three of the previous seven years are eligible for the scheme.

The department’s own summary of responses to the Bill said that a majority felt that the requirement that charities have their small donations claim matched to their gift aid claims is “an unfair concept and a barrier”. Respondents to the consultation argued it might “disadvantage small charities without regular income on which gift aid is claimed, poorer charities in poorer areas, charities that rely heavily on street collections and those, such as mental health charities, where a lot of donors are not taxpayers”.

“Most respondents” also opposed the test for eligibility being based on previous gift aid claims, again arguing that this would deter small charities from using the scheme, the report revealed.

However, both of these elements have made it into the bill. The government has responded that both elements are required to prevent against the possibility of fraud.

The number of charities claiming small amounts of gift aid relief (less than £1,000) has fallen over recent years, still hovering lower than 2005/06 levels. In contrast the number of charities which claim gift aid repayments valued at more than £1m has steadily increased, and in 2011/2012 nearly a third more charities are claiming gift aid at these levels than in 2005/2006. 

The Scheme is due to take effect in April next year.