A consultation has been launched on whether the scheme should cover charities and voluntary organisations with a turnover of less than £75,000 a year.
It would alter the present scheme, which applies to organisations that qualified in 1999 but does not include newly-formed charities.
The change would raise the threshold and remove the exemption from organisations which now have a higher turnover averaged over the past three years.
Extending the scheme would mean up to 5000 third-sector organisations would be exempt from the charges, the Government said. There are about 5800 members of the exemption scheme.