The acrimony between the Government and charity leaders intensified last night after David Cameron and George Osborne claimed philanthropists were giving money to good causes as a way of dodging tax.
The charge brought angry protests from multimillionaire supporters of charities, arts organisations and medical researchers. One accused the Government of a "disgusting" slur.
The Chancellor's decision to limit, from next April, the amount of tax relief wealthy donors can claim on philanthropic gifts – a move that critics claim will cost charities millions of pounds a year – has provoked outrage.
A former Philanthropist of the Year, Richard Ross, whose parents founded the Rosetrees Trust funding medical research, joined the attack on Mr Osborne's "perverse" scheme.
Mr Ross, an accountant who has given away £33m in recent years, told The Independent: "You want to encourage people to be more philanthropic, not limit them. [This decision] can only harm the country. They are using a sledgehammer to crack a nut. They are penalising everybody."
He added: "There are not enough wealthy people giving to charity and this is giving out completely the wrong message. It is saying if you give away too much we are going to penalise you."
Mr Ross said many wealthy people had made their fortunes through hard work and by being "very clever" but had a "psychological barrier" when it came to giving their money away, and the Government's approach "is making the barrier higher".
Dame Stephanie Shirley, who has given tens of millions to charity, said: "To look at philanthropists as if they were just tax avoiders is really rather disgusting."
She told BBC Radio 4 that donors are now privately warning charities of their "intention to put on hold plans to give five, six- or even seven-figure sums".
"That's quite significant for charities at a time when things are quite difficult for them," she said. Dame Stephanie, who was appointed the UK ambassador for philanthropy by the previous government, said: "If tax relief were to go, I would give the same amount, but that isn't true of most philanthropists."
Luke Johnson, who oversaw the rapid expansion of Pizza Express, and Sir Vernon Ellis, the chairman of English National Opera, have also denounced the proposal. Charities have launched a campaign for a rethink by the Chancellor and have been encouraged by signs of tacit support from Jeremy Hunt, the Culture Secretary, and Vince Cable, the Business Secretary.
Organisations as diverse as Unicef, Marie Curie Care, Universities UK, the National Theatre, the YMCA and ActionAid have joined the protests.
Both the Prime Minister and the Chancellor stood by the plans yesterday. The Treasury said charitable giving was open to abuse through organisations set up by donors overseas, although it was not able to provide examples. Mr Cameron's spokesman added: "In certain instances [donors] may be giving money to charities and those charities don't in all cases do a great deal of charitable work."
Whitehall sources later admitted that the donors who gave to charity to avoid tax were a "very small minority", but insisted the plans to limit tax relief were essential to ensure all sections of society paid their fair share.
The Government's new line of attack brought a scathing response from John Low, the chief executive of the Charities Aid Foundation: "This is not a ploy to save tax. Philanthropists who make large donations give away far, far more than they could ever claim in tax relief. That money goes to fund projects for the public good, such as medical research and help for the most vulnerable in society.
Mr Low said: "We should recognise and celebrate today's philanthropists, not brand them as wealthy tax dodgers."
Dan Corry, head of the New Philanthropy Capital think-tank, said: "There is an issue about how people use the tax system to [evade] paying tax. Where it comes to giving to charities, the whole point is to give a tax advantage because we would rather they gave money to charity than used it to buy a new yacht."
Charity champs: Leading donors
1. JK Rowling Has given £10m to research at Edinburgh University into multiple sclerosis, which claimed her mother's life.
2. Anurag Dikshit Massive wealth from developing software for playing poker online. Used £172m from selling shares to set up charitable foundation for educational and social projects.
3. Leonard Blavatnik Penniless at the age of 21, is now the sixth wealthiest man in Britain with estimated fortune of more than £3bn. Is giving £75m to Oxford University for a school of government.
4. David Harding A hedge fund financier who studied physics at Cambridge. Thirty years later, he is giving £20m to the university's Cavendish Laboratory.
5. Sir Elton John Consistently donates millions of pounds to humanitarian causes and work on HIV prevention.
6. Olivia Harrison The widow of George Harrison is jointly, with their son Dhani, supporting educational and humanitarian work in Bangladesh.
7. Richard Ross His parents founded the Rosetrees Trust, which funds medical research, on their golden wedding anniversary. In recent years, Mr Ross, named the Philanthropist of the Year last year, has given it more than £30m to charity.
8. Gordon Roddick In recent years the husband of the late Anita Roddick, the founder of the Body Shop chain, has given £2m to causes as diverse as theatres in Sussex and human rights in Africa.
9. Michael Hintze A major Tory donor, he also has also given £2m to the National Gallery in London and £1m to build a foundation in the Vatican's gardens.
10. Lord Fink A hedge fund millionaire gives a third of his income to good causes, including children's charities and HIV prevention work.