Art collector Saatchi gives the Turner Prize a run for its money

Charles Saatchi, the multi-millionaire advertising mogul and doyen of the contemporary British art scene, is to launch his own version of the most infamous event in the art-world calendar, Tate Britain's Turner Prize.

In a move likely to antagonise the Tate and its director, Sir Nicholas Serota, Mr Saatchi is planning to award a £40,000 prize to an outstanding UK artist each year – twice the sum lavished on the winner of the Turner.

The prize is expected to be unveiled officially in the spring at the launch of his most ambitious venture yet, a 40,000sq ft gallery designed to house his 3,000-piece collection of modern art. Situated barely half a mile from the Tate Modern along the south bank of the Thames, in County Hall, the former Greater London Council headquarters, it will showcase some of the most notorious works of recent times.

Highlights will include an opening retrospective for Damien Hirst, featuring Hymn, the 20ft anatomical doll he sold to Mr Saatchi for £1m, and the "pickled" shark, sheep and cow that first made his name. Permanent fixtures will also include at least one of Tracey Emin's unmade beds and a theatre for performances by the Old Vic.

Mr Saatchi's decision to launch an alternative to the Turner, a prize he recently dismissed as "claptrap", will be seen as an act of extraordinary vanity by a man who more or less single-handedly launched Brit Art. His ability to spend huge sums acquiring works by obscure artists has catapulted relative unknowns to instant fame. Last year alone, he spent an estimated £2m on new pieces – equivalent to the Tate's entire annual acquisition budget.

His attempt to upstage the Turner Prize will especially anger the Tate, which for some years has been struggling to retain its status as the primary custodian of contemporary British art. Unlike Mr Saatchi, who has the money to snap up works at auction on impulse, the gallery has neither the resources nor the remit to buy anything without consulting its trustees and raising donations.

As a result, Tate Modern remains relatively barren of work by many of the biggest names in contemporary art, while Mr Saatchi has acquired almost the entire oeuvres of "YBAs" (Young British Artists) such as the Chapman brothers and Jenny Saville. Tracey Emin, whose Turner Prize-shortlisted My Bed was bought by Saatchi for £150,000 three years ago, is said to be ambivalent about his patronage because of his work on the Tory campaigns that helped to keep Labour out of power throughout the 1980s. One art world insider said: "He can make or break people by cottoning on to them suddenly, or just deciding he's gone off them and he wants to dump all their stuff back on the market."

Reaction to news of the putative prize, which some wags are already calling "The Charlie", received a mixed reaction. Sir Nicholas was outwardly sanguine, despite the fact that he is said to be struggling to persuade Saatchi to loan some of his Chapman collection to Tate Liverpool for a retrospective scheduled for next year. "I don't think there's a feud," he said. "What he's doing is different. He's showing the things in his collection, whereas we are about celebrating the whole of contemporary British art."

While he declined to comment directly on the new prize in the absence of a formal announcement, he added: "If there are more prizes for art in this country, that's no bad thing."

The art critic Brian Sewell was not keen, however, dismissing the latest venture as further proof of what he called Saatchi's "infantile enthusiasm".

"I think there's genuine passion with him," he said. "I think it's like many people who know nothing – they don't know how little they know. He is unaware of his ignorance and therefore he uses all his money and his inadequate taste to buy all these things. It began as a type of infantile enthusiasm; once he had some pieces he had to have more and more. I don't think he rigs the market. The market rigs itself.

"It's got to the ridiculous stage now where people are buying up things just because they were once owned by Charles Saatchi, not even because of who the artist is. He will storm into an end-of-year show and buy up everything by a complete unknown. He should be taken very seriously."

Tim Marlow, the television presenter and editor of Tate Magazine, an admirer of Saatchi's championing of rising young artists, said: " If anything, we need more people like him." However, he added: "The prize idea is him being the 'ad man'. I don't think the timing is right."

The elusive collector, who lives with cook Nigella Lawson, was unavailable for comment, but sources confirmed he had been "talking about" the prize venture.

Meanwhile he has suffered one small setback. A £1,000-a-head fund-raising soirée for the Old Vic which would have seen Kevin Spacey, Sting and Ms Dynamite raising the roof of the gallery with the songs of Sir Elton John has had to be re-scheduled to a larger venue.