SCOTTISH billionaire Sir Tom Hunter has criticised George Osborne's plans to cap tax relief on charitable donations as "ill-thought-out and punitive".

The businessman and philanthropist, who has handed out more than £50 million through his charity The Hunter Foundation, was reacting after Downing Street suggested some of Britain's wealthiest people were giving money to bogus charities to avoid tax.

The Ayrshire-born tycoon, who sold his Sports Division chain of shops for £260m in 1998, joined charity leaders who had denounced the UK Government for branding the country's great philanthropists "wealthy tax dodgers".

The Chancellor revealed that he had been shocked by the analysis of the tax returns of some of the UK's richest people, which showed several had paid no tax at all.

Mr Osborne pledged to crack down on aggressive tax avoidance and announced last month in the Budget he would cap tax relief on charitable donations to prevent abuse of the system, affecting organisations such as the Hunter Foundation.

A spokesman for Sir Tom told The Herald: "It's an ill-thought-out and punitive policy which will undoubtedly have a negative impact on giving – including for us – and, in turn, a negative impact on charities.

"We don't agree with it [change in the relief ceiling] at all, and I hope the Chancellor might be persuaded he's misthought this whole agenda. We've got no issue with him picking up on those individuals who misuse the system as a vehicle for tax avoidance but under this policy money which would have been intended for charities will be lost."

He added: "We could all pay no tax and move to Monaco, if that's what he wants."

Mr Osborne's move has also sparked an outcry from Scottish universities and charities, which now fear big donations will dry up as a result.

While a spokesman for David Cameron explained the Treasury was talking to the charity sector about the tax relief cap, he made clear the Government would not budge on the principle.

"The system as it stands is open to abuse and we can't be in a situation where very wealthy individuals are able to wipe out their tax bills by using these reliefs. We don't think it's right someone on a very high income is paying far less tax than the average family," he insisted.

However, the Prime Minister's spokesman then suggested that charities some wealthy people gave to were not really charities at all. He said: "In certain instances, they may be giving to charities and those charities don't, in all cases, do a great deal of charitable work."

The spokesman also suggested some bogus charities were based overseas.

In its analysis, HM Revenue and Customs found the income tax rate among some of the highest earners was, on average, a mere 10% – less than half the rate normally paid by a British taxpayer.

Mr Osborne stressed the HMRC study had convinced him of the need to take action to ensure high earners paid more tax. The returns of the 20 biggest tax avoiders showed they had – legally – been able to reduce their income tax bills by £145m in a year.

From 2013, the total amount of tax relief any individual can claim will be limited to 25% of their income or £50,000, whichever is larger.

John Low, from the Charities Aid Foundation, said: "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 added: "We should recognise and celebrate today's great philanthropists, not brand them as wealthy tax dodgers."

The National Galleries of Scotland has already raised concerns about the tax relief cap, saying it could deprive it of the money needed for major projects.