'Golden age' of museums threatened by Chancellor

Backlash builds against Osborne's proposed 'philanthropy tax'

Two-thirds of Conservative and Liberal Democrat MPs oppose George Osborne's "charity tax", a poll revealed last night as the Government prepared for a partial retreat over plans to cap tax relief on major donations.

The scale of the backbench resistance to the proposal emerged as Martin Roth, the director of London's Victoria & Albert Museum, warned that the tax-relief moves could jeopardise what is a proving to be a "golden age" for museums and galleries.

Mr Roth, whose museum enjoyed a record number of visits last year, told The Independent that cultural organisations feared the repercussions of the plan. He said: "I hope that there will be exceptions to it. We are very concerned."

His comments add to the growing anger among charities, universities, medical-research centres and arts organisations. Mr Osborne is also facing a separate backlash from church leaders angry over moves to introduce VAT on the restoration work on historic buildings such as cathedrals.

Under Mr Osborne's surprise Budget announcement, tax relief will be capped at £50,000 or 25 per cent of a donor's income from next April. While small numbers of philanthropists would be affected by the scheme, which is designed to cut tax avoidance, critics say there would be a disproportionate impact on charities that rely on large gifts.

The Chancellor is looking for ways of mitigating the harm to charities without undermining the proposal's central principle. The extent of the opposition within Coalition ranks to the move was underlined by a ComRes survey of Tory and Liberal Democrat MPs.

It found that 65 per cent agreed that "tax relief on charitable donations should be exempt from the proposed cap", while 68 per cent thought ministers should review the plan.

The survey, commissioned by the Charities Aid Foundation, also showed that 93 per cent thought the Government "should do all it can to use the tax system to encourage charitable donations from wealthy donors".

Zac Goldsmith, the Tory MP for Richmond Park, yesterday said he was "ashamed" that a Conservative chancellor had "declared war on the country's biggest philanthropists". To the party's embarrassment, its treasurer, Lord Fink, also warned that the move would inevitably cut the amount of money for good causes: "If you have to pay out of your capital the tax on your income you give, it will put people off."

Ministers repeated yesterday that they would listen to charities' concerns. One proposal being examined by the Treasury is to phase in the cap. Ministers are also understood to be examining a US-style "lifetime-legacies" system that allows individuals to "donate" assets to institutions and charities but continue to benefit from them during their lifetimes.

A Treasury spokeswoman said: "It is right to cap reliefs so wealthy individuals cannot use them to reduce their tax bill to practically zero."

Separately, ministerial critics of government plans for a "green deal" that will offer loans to families that undertake environment-friendly home improvements are pressing for the scheme to be scrapped following the disclosure that it will drive up the cost of house extensions by 10 per cent.