Private donations to referendums might not be taxed in future, a Treasury minister has said, after an outcry over 'anti-democratic' tax demands running into millions of pounds were sent to Brexit donors.

Philip Hammond, the Chancellor, is said to be “sympathetic to looking carefully” at the changing tax law so that large scale donations to referendums campaigns by private individuals are not subject to inheritance tax.

However any change as result of the rethink will not affect the demands running into millions of pounds which were sent to the prominent donors to the 2016 European referendum campaigns.

Last night donors facing the large bills welcomed the change of heart – but urged Mr Hammond to change the law retrospectively.

In the letters the tax authorities had seized upon a relatively obscure area of inheritance tax laws which forces people to pay the 20 per cent tax upfront on large "gifts" during their life times.

The demands were attacked by Boris Johnson, the Foreign Secretary, and Michael Gove, the Environment secretary, who both led the Vote Leave campaigns, as anti-democratic.

In the House of Commons on Tuesday, Conservative MP Jacob Rees-Mogg said it was "deeply unfair" for people who contributed to referendums linked to changing the voting system, Scotland and the EU to receive such bills.