I believe that they fit together, and I hope that the purpose of the Government amendments will become clear.
Concerns were raised that the eligibility criteria in the Bill were too restrictive, that too many charities that did not already claim gift aid would be put off the scheme because it would take too long to become eligible, and that some short-lived charities would never reach eligibility. Balanced against those concerns is the fact that the Government have always been concerned to protect the scheme against fraud. I have looked again at where the balance lies between accessing the scheme and protecting it from people who would try to exploit and abuse it, and I have concluded that we can reduce the eligibility period to two years without undermining the integrity of the scheme. Eligibility for the scheme is defined by reference to successful gift aid claims made by a charity in the past, and I now propose that the minimum period should be set at two years.
I shall explain in more detail what our amendments will do. Four factors will determine the eligibility of a charity or community amateur sports club for the scheme, as set out in clause 2. The first is the start-up period—the number of complete tax years for which a charity must have been established before it becomes eligible for the scheme. We are reducing that period from three years to
two years, so a charity or CASC will now be able to access the scheme a year earlier than was originally set out. The second and third elements are that a charity has to have made claims in two of the previous four years, and that there is a gap of no more than two complete tax years between the claims. The amendments will ensure that HMRC is guaranteed to see a minimum level of claiming activity by the charity or CASC in question, so that it can get to know that organisation and understand its ability to claim gift aid correctly.
The fourth element is the impact of a penalty on eligibility. If a charity receives a penalty, it will be excluded from the scheme for the tax year in which it makes the claim and the following tax year. Originally, the charity would have been excluded for the following two years, but amendment 26 means that the exclusion will be for only one year following the year of the claim.
That all adds up to a significantly more accessible scheme for new charities that have not claimed gift aid before, but we do not know exactly how the scheme will operate in practice. As I have said, we will review it after three years, when we might find that fraud rates are much higher or much lower than expected, so it is sensible to build flexibility into the Bill to amend the eligibility criteria in future. Many charities have asked the Government to do that. That power will enable us to vary the elements of the eligibility criteria up or down, depending on the evidence that we see on how the scheme operates and its susceptibility to fraud.
Those four elements interact with each other, and with the matching criteria, to provide safeguards for the scheme. We want to build the maximum flexibility into the Bill by allowing each of those periods to be reduced, increased, removed or reinstated. Any use of that power would be through the affirmative procedure, so it would be consulted on and subject to debate in the House. However, we do not want flexibility to undermine the integrity of the scheme or its important link with gift aid, so the requirement for a charity to make a minimum number of gift aid claims over a set number of years will always remain.
I now turn to the last set of amendments in this group. Since the Public Bill Committee, we have reassessed the distribution of powers to make secondary legislation in the Bill, some of which are conferred on the Treasury and some on HMRC. Broadly speaking, a power that changes the nature of the scheme in some way should be exercised by the Treasury. A power given to HMRC should be to allow the collection and management functions to be carried out correctly. The powers in the Bill are currently inconsistent with that approach, so we are introducing amendments 28 and 29 to change the powers in clauses 7 and 8. Those relate to running charitable activities in a community building and the definition of a community building. The powers are currently assigned to HMRC, but we now think it would be more appropriate to assign them to the Treasury. That is because they could be used to make significant changes to what is in or outside the scope of the rules. I hope that that helps explain why we have tabled those amendments.
I come now to my conclusion, Mr Deputy Speaker. [Hon. Members: “Hear, hear.”] The conclusion is very popular. I do not consider that there is any need for statutory reviews of the scheme at 24 months, and neither is there a need to require HMRC to publish
certain data. There will be a full review of the scheme after three years, and HMRC will be publishing what data it has three times a year. New clauses 1 and 2, and amendment 21, would be wasteful and would require duplication of resource for no good reason. I therefore ask the hon. Member for Kilmarnock and Loudoun not to press those to a Division, just as I ask other hon. Members not to press new clause 3, amendments 32 and 33, and amendments 8 to 16.
I hope that hon. Members are comforted by the Government amendments that will reduce the three-year eligibility rules to two years. I am introducing a set of amendments that do what many charities and hon. Members have asked us to do, which is reduce the barriers to entry for this scheme and cut the eligibility period. I accept that some hon. Members wanted me to go further, but that would leave the scheme too exposed to fraud. These amendments represent an important concession by the Government, and I call on hon. Members from both sides of the House to support them. I am also introducing two technical amendments, Nos. 28 and 29. I commend the Government amendments to the House.