HMRC has opened a consultation on the Gift Aid Small Donations Scheme – but the Charity Finance Group has told the Revenue that it “needs to think bigger”.

The consultation, which was published online yesterday, contains proposals including relaxing how long charities have to have claimed gift aid before they are eligible for the scheme, from two years to one year. The document also indicates a willingness to explore extending the scheme to contactless payments.

Other proposals include consideration changes to the rules around connected charities and community buildings.

The scheme was introduced in 2013 to enable ‘top-up’ gift aid-style payments for small cash donations but has raised far less for charities than was originally intended. Latest figures suggest that it raised £21m in 2014/15 – far less than then £135m the government had expected the scheme to be raising by 2015.

In the foreword Damian Hinds, exchequer secretary to the Treasury, said: “The government is committed to working with the charity sector to ensure that the Gift Aid Small Donations Scheme is effective and benefits as many charities as possible. I hope you will read the proposals set out in this consultation with interest - the government looks forward to receiving your responses.”

Last year HMRC issued a call for evidence. In a joint response a group of sector bodies, including NCVO, CFG and the Institute of Fundraising, made six recommendations, including calling for the removal of the matching requirement which obliges charities to have claimed gift aid on an amount that is at least 10 per cent of the value of the donations on which GASDS is being claimed.

In response to the consultation, Andrew O’Brien, head of policy and engagement at the Charity Finance Group, said: “It is good that HMRC has decided to take on board some of the sector’s concerns about the eligibility criteria and upgrading the rules to include contactless payments. Changing the eligibility criteria so that anyone that claims gift aid can claim GASDS would be a big simplification and improvement.

But he said he was disappointed that HMRC had not gone further.

“However, it is disappointing that the matching rule is not up for change at present. Our survey of charities showed that this was a barrier for charities claiming the relief and HMRC’s own figures show that thousands of charities will not be able to take full advantage of the relief as the rules currently stand. HMRC needs to think bigger if it wants this scheme to work effectively.”

John Hemming, chair of the Charity Tax Group, said he was pleased that the consultation includes “a number of the key recommendations in CTG’s response to the call for evidence, including: a partial relaxation of the gift aid history requirement; clarification of the community buildings rules; and steps to future-proof the Scheme to accommodate new types of small donations".

He added that: “Positive changes are required to improve uptake, which is still too low, and improve accessibility. We will continue to work with officials to improve guidance and ensure that there is less complexity for charities in the administration of the scheme.”

The consultation closes on 1 July. Responses can be sent by email to [email protected] or by post to: GASDS Consultation, HM Revenue & Customs, Room G/45, 100 Parliament Street, London, SW1A 2BQ.