UKIP is being investigated by the Electoral Commission over claims it misspent EU funding on trying to win the Brexit vote and to boost its election chances.

The inquiry will look at whether UKIP accepted "impermissible donations" from the European political party the Alliance for Democracy in Europe (ADDE).

It comes after an audit compiled for the European Parliament Bureau alleged UKIP misspent nearly £400,000 to fund its own electioneering and to help boost the Brexit campaign - essentially using EU money against the EU.

The money was provided to the European political grouping, the ADDE, which is dominated by Mr Farage's party and was created by UKIP leader Nigel Farage two years ago.

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It was apparently used on polling "conducted in the interest of UKIP" that was "essential for reaching a significant representation in the House of Commons from the 2015 General Election or for a positive result for the 'Leave Campaign'".

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The Electoral Commission said representatives had met with people from the European Parliament and "inspected material that it gathered as part of its audit".

Parties must record donations of money or services with a value of more than £500 and check that they are from a permissible source.

Under EU laws EU funding cannot be used for the "direct or indirect funding of national parties, election candidates and political foundations at either the national or European level".

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The Electoral Commission could fine UKIP as much as £20,000 if it finds the party has acted improperly.

Image: Nigel Farage on the EU referendum campaign trail

The European Parliament Bureau has asked ADDE and the UKIP group to repay the money it was given and stopped them from trying to claim back any further money for polling.

Mr Farage has denied using EU cash to try to win the South Thanet seat at the General Election and claims he is being victimised.

He told Sky News the party did not use EU "money in Thanet or anywhere during the General Election".

When the news broke last week, he said: "I've understood absolutely the rules. This is pure victimisation. I am the most investigated MEP in history. Look at what the pro-EU groups were spending."

The money, according to the audit, was used to fund polling in Great Grimsby and Thurrock, Rochester and Strood and Cardiff South and Penarth - all UKIP target seats at the last election.

Polling was also paid for ahead of the General Election in Thanet South, where Mr Farage unsuccessfully ran to become an MP.

Funds were also spent on polling around the EU referendum.

A Ukip spokesman said: "We are confident we have abided by all electoral rules."