Attack on philanthropic donations has already cost charities £5m

A leading philanthropist called for George Osborne to scrap his "wicked" plans to limit tax relief on large charity donations as a backlash gathered pace against the moves.

One anonymous donor is believed to have scrapped plans to hand £5 million to a charitable foundation since the Chancellor's surprise announcement and fears are growing among universities that they could lose vital investment.

Leading figures in the charity world wrote to Mr Osborne last night, warning of the potentially "devastating" effect of his move and demanding a rethink.

Their anger focuses on a planned cap on wealthy individuals claiming tax relief, including relief on gifts to good causes. They claim the move could cost charities millions of pounds a year as philanthropists are deterred from handing over cash.

The retired businessman Michael Cowen, a regular donor to Brighton and Sussex Universities, said: "This Government keeps on referring to the Big Society as something it really believes in. They are reducing the funding, at national and local government levels, by 30 or 40 per cent which means a lot of charities are closing down. Now separately they are proposing to reduce the amount of money charities can receive from donors."

Mr Cowen, whose donations include £625,000 for medical research and £150,000 for research on greenhouse gasses, added: "It seems wicked. The charities may need the money – a lot of them can keep going with relatively small amounts."

Although the Treasury's move will only affect a relatively small number of people, it could have a disproportionate impact.

Between 80 and 100 separate donations of more than £1m, and worth a collective total of £800m – £1 billion, have been made annually to charitable trusts or foundations in recent years. Almost half of gifts come from just 8 per cent of donors.

One source said they had learned of a donor cancelling a transfer of £5m into a charitable foundation within hours of Mr Osborne's announcement.

The leaders of six large fund-raising organisations denounced the move in a letter sent last night to Mr Osborne. The letter warned: "There is a clear danger that this measure could have the unintended consequence of disincentivising the donation of large gifts to charity. Charities rely heavily on major philanthropy of this kind, and any reduction in giving could be devastating for the many vulnerable people who rely upon our services."

Signatories include John Low, the chief executive of the Charities Aid Foundation, Sir Stuart Etherington, the chief executive officer of the National Council for Voluntary Organisations, and Peter Lewis, the chief executive officer of the Institute of Fund-raising.

Last night the Treasury said a minister would meet fund-raisers to discuss their worries. A spokesman said: "We have been very clear we are going to work with them to make sure there will be no significant impact on large donations."