There is an “overwhelming case” for an early review of the Gift Aid Small Donations Scheme because most of the charities it was aimed at either do not know about it, cannot understand it, or are not eligible for it, a group of umbrella bodies has said.

The Charity Finance Group, Institute of Fundraising and NCVO together conducted a survey of charities to find out their experience of GASDS and found that the smallest charities are “struggling to work out if they qualify” or to use it. They published a joint briefing last week which summarises the results of the research.

“This demonstrates to us that the scheme is not succeeding in line with its original stated policy intent,” the three organisations said in the briefing. “There are inherent problems in the scheme.”

The three umbrella bodies launched the review after HM Revenue & Customs published data showing the scheme has raised only £7m. This was later revised down to only £6m.

The GASDS allows charities to claim a gift aid-like relief of up to £1,250 a year on £5,000 of small cash donations even if they do not have the usual gift aid paperwork.

But to do so a charity must already have claimed gift aid for two of the last four years, must claim gift aid in the same year as making a GASDS claim, must have a good record with HMRC, and must not be “connected” to another charity by having the same trustee board.

Yesterday the Charity Tax Group also independently called for a review of the relief. And earlier this year the Church of England said parish charities had missed out on £16m because HMRC was interpreting the rules too strictly.

“The government has previously committed to a review of the GASDS after the first three years. However given the significant lack of participation by charities and the evidence for why this is, we believe that there is an overwhelming case for starting this review now,” the umbrella bodies said in their review.

They said HMRC had interpreted the rules strictly because of concerns of fraud and abuse, which did not appear to have been borne out in practice.

The three bodies say HMRC should relax the rules, to enable any charity registered for Gift Aid to claim through the scheme, removing the requirement for charities to have been in existence for two years and have made two previous Gift Aid claims. They also say HMRC should remove the matching requirement for donations.

They also called for an increase in the amount that can be claimed through GASDS, and for non-cash donations to be allowed.