Under proposals put forward by Labour MPs, HM Revenue & Customs would have to produce an annual report on charities that have been set up specifically to make money through the Gift Aid Small Donations Scheme.
Proposed amendments to the Small Charitable Donations and Childcare Payments Bill, which have been tabled by four Labour MPs, including John McDonnell, the shadow chancellor, call on HMRC to produce a report for each tax year, beginning with 2017/18, that would include "its assessment of the extent to which charities have been established or operated for the primary purpose of securing benefits from the small donations scheme".
The bill is designed to simplify the GASDS, which allows charities to claim Gift Aid-like relief on up to £8,000 of small cash donations each year without individual paperwork. It has been criticised by charities for being too complex.
The amendments are due to be discussed at the bill’s third and final reading in the House of Commons next week, but sector figures told Third Sector they did not believe the amendments would be accepted by the government and form part of the final bill.
Under the Labour amendments, HMRC would also be required to report on its "assessment of the evidence available on the role of the Gift Aid matching rule in preventing fraud and abuse".
The matching rule says that charities must claim £1 in Gift Aid for every £10 claimed under the GASDS, but charity umbrella bodies including the National Council for Voluntary Organisations have called for it to be scrapped, saying it is a "barrier and a burden for charities".
Another amendment calls for a review of the matching rule by the Chancellor of the Exchequer before the end of the 2017/18 financial year.
John Hemming, chairman of the Charity Tax Group, said: "CTG welcomes the latest amendments tabled to the bill, in advance of the report stage. They support CTG’s calls for further simplification of the GASDS, in particular in relation to the matching rule and the clarification of the application of the connected charities rules for uniformed charities.
"We hope that the government will take this opportunity to review the scheme to ensure that take-up is maximised and safeguards against fraud are proportionate."