Sports governing bodies are to call on the Treasury to reform "nonsensical" tax laws in order to boost the amount of money they can invest in grass-roots schemes. Under the existing rules, money invested in millionaire sportsmen like Kevin Pietersen and Andy Murray escapes the grasp of the taxman while grass-roots schemes designed to boost participation are charged at the full rate.

In a letter to the Guardian today, the chief executives of the bodies that oversee rugby union, rugby league, tennis and cricket have asked the chancellor to amend corporation tax rules, claiming they fly in the face of the government's rhetoric on building a sporting legacy from the 2012 Olympics. The CCPR, an umbrella organisation representing 280 sporting bodies from the Football Association to the Ramblers Association, is also backing the campaign.

It is understood that the department of culture, media and sport has promised to lobby the Treasury on behalf of the sports involved, but that chancellor Alistair Darling will need to be convinced that the rule change won't set a precedent that could be exploited by other organisations.

"The sports world has come together to make this matter the sole focus of our request for action in the forthcoming budget. We recognise that in the current economic climate any tax change needs a clear rationale of the public benefit it will bring," says the letter.

"That is why we are writing today to place on public record our commitment that should the chancellor agree to change our taxation status that we are all committed to ensuring that the savings are reinvested back into community sports programmes."

Under the existing tax regime, money invested in grass-roots development schemes is considered non-revenue generating by the Inland Revenue because it does not lead directly to increased attendances or viewing figures. As such, it is not deductible for corporation tax purposes and is subject to tax at 28%. But because money invested in commercial activities such as elite squads and stadium developments can be said to be generating revenues directly, those sums are not taxed.

Over time, each of the sports has found ways around this anomaly by channelling money through trusts or foundations into their grass-roots schemes.

For example, the England and Wales Cricket Board channels between £6m and £7m a year through the England and Wales Cricket Trust that is then invested in grass roots initiatives such as the Chance to Shine project designed to promote the sport in schools.

Although this exempts them from tax, the executives who put their name to the letter, including Lawn Tennis Association chief Roger Draper and Rugby Football Union chief Francis Baron, argue that it creates an unnecessary layer of bureaucracy, wastes management time, incurs consultancy and legal costs and could even dissuade sports from investing in grass roots projects .

"They are putting a square peg in a round hole. It doesn't work and we've spent a long time trying to get around it," said ECB finance director Brian Havill. "We have suggested that we do something as a legacy for 2012. We have promised to put the money into grass roots sport. That is something the government has pushed for and encourages."

The sports say it is nonsensical to apply rules designed for businesses to not for profit bodies and argue that at a time when a record amount of government money is being invested in grass roots sport through Sport England, it makes little sense to tax the schemes through which they are invested. They add that most other European countries have rules making sports governing bodies a special tax case.

In today's letter, it is also suggested an annual account be published on how the money saved has been invested back into the grass roots, arguing also that the money saved will help them deliver on the government's wider policy aim to use sport to combat obesity and increase social cohesion.Baron said that money saved through the tax break, if it was granted by the chancellor in his budget next month, would be reinvested in schemes such as the RFU's community coaching programme, through which 130 full-time coaches promote the sport in schools, provide equipment and build links between clubs and schools.