People submitting self-assessment tax forms are failing to use a gift aid scheme that has seen an incremental loss to charities since its inception in 2004.

The government SA Donate scheme allows taxpayers who fill in self-assessment tax returns to opt to donate part or all of their repayments to charity. It has generated £1.6m for charity since its launch in 2004; but while charities benefited from £575,902 in the first financial year the scheme operated, this fell to £364,659 in 2005-6 and in the first nine-months of 2007-8 charities received just £213,851.

The scheme also allows higher-rate taxpayers who receive money back in tax relief on charity donations, or on gifts of land or shares to charity, to donate their rebate straight to charity.

The crux appears to be that charities can only benefit from the scheme if they register with HM Revenue & Customs for a special tax code, which the taxpayer then inserts into a designated box on their tax return. In the first year 37,605 charities registered for a tax code compared to only 1,113 in 2006-7.

Also, another factor could be that taxpayers are expected to tick the box to donate repayments before they know the value.