The Small Charitable Donations and Childcare Payments Bill has passed through the House of Lords and will become law later this week.
After its second and third readings took place in the House of Lords yesterday, the bill, which is designed to simplify and strengthen the Gift Aid Small Donations Scheme, will come into effect at the start of the next tax year.
The bill was designated by the speaker of the House of Commons as a money bill on 16 November when it was introduced in the House of Lords. This means it has to receive royal assent within a month regardless of whether it passes through the Lords.
The government estimates that the reforms to the GASDS included in the bill will increase the amount of Gift Aid claimed by charities under the scheme by £15m a year. The GASDS currently delivers £26m a year to the charity sector.
But this remains significantly short of the £100m a year the government initially expected the GASDS to raise.
During the second reading yesterday, several lords said that the bill was a welcome improvement on the old GASDS scheme, but it was disappointing that proposals to allow other forms of payment, such as cheques and text donations, to count towards the scheme were not included in the bill.
Others also criticised the retention of the matching rule, which says that charities must claim £1 in Gift Aid for every £10 claimed under the GASDS.
Speaking on behalf of the government, Lord Young of Cookham said the matching rule was retained to "maintain a link between the small donations scheme and the full Gift Aid scheme". Rob Wilson, the Minister for Civil Society, has previously said that retaining the rule would help to prevent fraudulent activity.
But the Conservative peer Lord Shinkwin, a former charity sector worker, said that the matching rule was unnecessary because charities using the GASDS would still have to register with HM Revenue & Customs.
He said: "Why does HMRC appear to believe that such assurances are insufficient to monitor those claiming and to deter potential fraudulent activity? What evidence has been put forward by HMRC of the ineffectiveness of these measures from a fraud perspective?
"If the scheme is significantly undershooting its proposed targets, could we not be looking pragmatically at how to ensure that the scheme achieves its full potential?"
Baroness Barker, Lords spokesperson for the voluntary sector for the Liberal Democrats, said the government should have insisted that charities exist for a year before they could register for the GASDS.
She said further reviews of the GASDS should consider whether the scheme was the most cost-effective way to support the sector, and whether there were alternative, simpler ways of benefiting charities.