Britain’s leading Jewish organisation has accused Nigel Farage of putting Ukip’s credibility on the line by striking a deal with a far-right Polish party whose leader has a history of Holocaust denial and racist and misogynistic comments.

The Board of Deputies of British Jews said Farage had “very serious questions to answer” after the Ukip leader confirmed that an MEP from Poland’s Congress of the New Rightwould be allowed to join his European grouping.

Defending his decision, Farage said on Tuesday that he needed Robert Iwaszkiewicz to join his Europe of Freedom and Direct Democracy (EFDD) alliance to preserve its existence, as EU parliamentary groups were required to have at least 25 MEPs from seven different countries. The deal would guarantee that Ukip will would maintain about £1m a year in funding.

Farage told the BBC that he had never spoken to Iwaszkiewicz but he had found “nothing in this guy’s background to suggest that he is a political extremist at all”.

The Ukip leader also hit out at the European authorities for an “extraordinarily corrupt backroom deal” that meant the EFDD nearly had to fold when one of its MEPs, a Latvian, resigned.

“All of us in the European parliament have to make compromises to make sure our voice is heard,” he said. “I want us to have our voice. I want us to be heard. But I will not do it at any price, so if it came to a decision that do we cast Ukip to the outer darkness of the non-attached group, or do a deal with a known prominent extremist in Europe, I would not do that deal.”

The controversy erupted on the same day as Farage was fined £200 by the Electoral Commission for accidentally failing to declare that he had had free use of an office since 2001. And Ukip was forced to defend its new calypso theme tune as a “bit of fun” against accusations that the singer’s mock-Caribbean accent carried racist undertones.

Despite the Ukip leader’s defence of Iwaskiewicz, critics said it was unacceptable that the party was linking up with someone who belonged to a far-right party that was eschewed even by the Front National in France.

Iwaszkiewicz caused controversy when he reportedly said that hitting a woman could “help them come back down to earth”, which he later claimed had been a joke.

Jonathan Arkush, vice president of the Board of Deputies of British Jews, said the his organisation was “gravely concerned by reports that Ukip may sit in the same parliamentary grouping as a far-right Polish MEP in a bid save its funding”.

Arkush added: “Robert Iwaszkiewicz belongs to an extremist party whose leader has a history of Holocaust denial, racist remarks and misogynistic comments. He belongs to the far-right Polish JKM [Congress of the New Right], led by Janusz Korwin-Mikke, who has reportedly called into question the right of women to have the vote.

“Furthermore, we entirely reject Ukip’s justification that ‘all groups in the European parliament have very odd bedfellows [and] the rules to get speaking time and funding are set by the EP, not Ukip’. Extremists and racists should be roundly rejected, not embraced. Even France’s far-right Front National rejected the JKM as being too extreme.

“ For Ukip to choose such a figure as Robert Iwaszkiewicz as a bedfellow, apparently for money, is beyond belief. Nigel Farage now has some very serious questions to answer. He has placed in issue the credibility of Ukip.”

Rafal Pankowski, an executive member of the Polish anti-racist group Never Again, said that the intervention of British Jewish groups followed many concerns from the Polish community.

“The Congress of the New Right’s leaders and leading members have often used anti-semitic stereotypes in their discourse and used the phrase Jewish communism many times in speeches and articles,” he said. “I am surprised by Ukip’s decision to get involved with the Congress. It shows that racist and anti-semitic statements are no barrier to Ukip.”

Korwin-Mikke, whose party has two remaining MEPs and received 7.5% support in Poland during May’s European parliamentary elections, is one of the most outspoken figures within the far-right groupings of parliament.

In July, he declared in English that the minimum wage should be “destroyed” and said that “four million niggers” lost their jobs in the US as a result of the US president John F Kennedy signing a bill on the minimum wage in 1961.

He went on to claim that 20 million young Europeans were being treated as “negroes” because of the minimum wage. He refused to apologise and was fined 10 days of allowances for his comments.

Korwin-Mikke has also called for the vote to be taken away from women, has claimed that the difference between rape and consensual sex was “very subtle” and has said that Adolf Hitler was “probably not aware that Jews were being exterminated”.

Marine Le Pen, leader of the Front National, ruled out forming an alliance with the Congress of the New Right after the European elections. “[Korvin-Mikke’s] remarks, his political views, ran contrary to our values,” she said at the time.

The EFDD has been desperate to recruit a new MEP since last Thursday when Iveta Grigule, a Latvian member of the group, resigned. This meant that the group only had MEPs from six EU member states, just below the number needed to qualify for official group status.

Former UKIP MEP candidate, Shneur Zalman Odze, who is a rabbi, defended his party’s decision to ask Robert Iwaszkiewicz to join the EFDD Group.

“The only comment he made on Hitler was that he was an evil man who should have been executed,” he said. “Korwin-Mikke is not a member of the EFDD group.

“Both Ukip and EFDD Group abhors and rejects any scent of anti-Semitism. As a Jewish rabbi, I was number four on the Ukip north west MEP candidate list, and I can assure you in my many years in Ukip I have never once experienced any anti-semitism.”

He argued many political parties in the European parliament have “very odd bedfellows”.

• The headline on this article was amended on 22 October 2014 to remove the words “say Jews”, an unacceptably broad description.