Rules on gift aid are to be simplified and made “fit for the 21st century”.

Last week’s Queen’s speech announced a Small Charitable Donations Bill, in a bid to reform the Gift Aid Small Donations Scheme (GASDS).

The scheme, introduced in 2013, allows charities to claim relief on up to £8,000 of small cash donations without the normal paperwork, but it has proved to be far less effective than the Government hoped.

In fact, it was expected that the scheme would raise £135m, but latest figures for 2014/15 put this at just £21m.

Now the new bill aims to make the relief “easier to claim, to allow more charities to benefit”.

One example of this will be to allow smaller charities to claim a 25 per cent bonus from bucket collections or “any donations collected away from their building.”

This will particularly help charities that operate from a small community building.

The new regime will also clarify current rules and reduce the admin burden, again benefiting smaller charities.

“The inclusion of a Small Charitable Donations Bill could be good news for charities, particularly for smaller organisations which have often struggled to unlock the benefits of Gift Aid. This provides a real opportunity to simplify the scheme and make it fit for the 21st century,” said John Low, chief executive of the Charities Aid Foundation.

Andrew O’Brien, of the Charity Finance Group, said: “It is good to see that the government has listened to the sector and recognised the need to get on with reforming the Gift Aid Small Donations Scheme.

“The devil will be in the detail, but the focus on making the scheme easier to claim and, more importantly, opening it up to new charities is particularly welcome.”

Charlotte Ravenscroft, head of policy and public services at NCVO, said: “The small donations scheme is a great idea that’s been sadly hampered by restrictive eligibility rules.”

HMRC has launched a consultation on GASDS. The full consultation can be viewed on the HMRC website and closes on 1 July.