Gift Aid declaration forms should make it clearer that claiming the relief does not involve any cost to the donor, according to research commissioned by HM Revenue & Customs.
The government has committed itself to producing a new version of its model forms, which charities and community amateur sports clubs can use to collect the information needed to claim Gift Aid on donations.
A spokeswoman for HM Treasury said these should be ready in early 2015.
A report published yesterday by the research firm TNS BMRB and commissioned by HMRC reports on the findings of interviews and focus groups with 40 members of the public.
The report says: "Participants generally knew that Gift Aid involves the government ‘topping up’ donations made to charities, although understanding of how this worked in practice was generally poor, with the link to individual tax seldom made."
It found that people often claimed Gift Aid automatically or unthinkingly, because they felt it was "the right thing to do", even if they were not aware that they were not eligible because they did not pay any or enough tax.
Conversely, some people who were eligible to claim did not, for such reasons as believing it meant a cost to them or the charity, being unwilling to share personal information in case they were re-contacted for fundraising and considering form-filling an inconvenience.
The report says that Gift Aid declarations in general, including the government’s model forms, need to strike a balance between being short enough not to put people off and clear enough for people to understand - without oversimplifying the key legal information about what Gift Aid involves.
It says Gift Aid declarations need to get five key messages across: the benefit to charity at no cost to the donor; the fact that eligibility is related to tax paid by the individual; the fact that the donor’s address is required; the fact that donors must have paid enough tax to cover all Gift Aid donations; and that the declaration refers to the current tax year.
The report says that declarations involving two or three tick boxes would ensure donors make an active choice about claiming Gift Aid. "The overall tone should be kept positive to maintain a disposition to claiming for those eligible," it says.
Priti Patel, the Exchequer Secretary to the Treasury, who is responsible for charity and voluntary sector issues, said: "This research shows that there is more that government can do to boost eligible donations, which is why we are simplifying the declaration forms to make sure donors understand when they’re eligible so that charities can maximise the financial donations they receive."
Richard Bray, vice chair of the Charity Tax Group, said early drafts of the revised model Gift Aid declaration form showed improvements such as a much shorter declaration and the deletion of references to council tax and VAT.
"It is vital that we create a Gift Aid declaration that is easy for donors and charities to use and fit for the modern age," he said. "At the same time, it must not mislead donors about what their responsibilities are, while not being worded in a way that could discourage eligible donors."
But he warned that the limitations of the research must be taken into account when drawing up a revised declaration.
"There was little focus on enduring declarations and declarations used in different mechanisms such as direct mailing – and it would be unwise to draw conclusions too widely without further research and testing," said Bray.
According to a National Audit Office report of last year, Gift Aid was worth about £1bn to UK charities in 2012/13, or 2 per cent of the sector’s total income.