UKIP leader Nigel Farage could face jail for not declaring the free use of his Sussex office.
The 50-year-old, who is widely tipped to become an MP at next year’s general election, has been told by the elections watchdog he could face up to a year in prison and a maximum fine of £20,000.
The potential punishments relate to him not declaring the free use of his European Parliament South East region constituency office in Lyminster, just outside Littlehampton.
The use of the converted barn over a 14 year period has been calculated as equivalent to a £205,602 donation.
The office was donated to him by local farmer and long running UKIP supporter John Longhurst in 2001.
While Mr Farage disclosed the gift to the authorities in Brussels, he failed to notify the UK-based Electoral Commission.
The issue is said to only have emerged when officials saw the barn mentioned in news stories in the run-up to recent local and European polls.
A spokeswoman for the Commission said: "When we became aware of the potential unreported donations, we were in correspondence with Mr Farage. This then led to the donations being reported to us.
"We have not yet made a decision about whether any further action will be taken against Mr Farage for reporting the donations late.
"We are continuing to review all of the necessary information supplied to us by Mr Farage and are considering it carefully."
Under the Political Parties, Elections and Referendums Act 2000, regulated recipients - including MEPs - must report gifts within 30 days of accepting them.
If the Commission decides to refer the case for criminal prosecution and Mr Farage is convicted he could face up to a year in jail and a £20,000 fine.
Despite the free use of the office, EU expenses claims show Mr Farage has used £15,500 a year on “office management and running costs”.
However, the UKIP leader denies any wrongdoing.
A party spokesman said: "Every year since 2001, Mr Farage has declared in his European Parliament Register of Interests the use of a rent-free office from J Longhurst Ltd.
"The premises has been used as his MEP office so the European Parliamentary register was the logical place for it to be declared.
"Mr Farage was surprised to learn that the Electoral Commission thought it should be informed as well, as this did not accord with the professional advice he had received at the time."