Communal organisations have called on the government to stop funding Birmingham-based charity, Islamic Relief, after it was banned as a terrorist organisation by the United Arab Emirates (UAE).

Islamic Relief, which signed contracts worth £12.5 million on projects funded by the UK government in the last calendar year, has already been banned from operating in the West Bank after it was accused of funding Hamas by the Israeli government.

Paul Charney, chairman of the UK-based Zionist Federation, said: "There should be a renewed examination of their operations, not to mention a cessation of funding from our government."

Board of Deputies President Vivian Wineman said it had "raised the issue with the UK and Israeli governments, as well as Islamic Relief itself."

But a spokesman for the charity, which is a member of the UK's Disasters Emergency Committee (DEC), attributed the UAE designation to a "mistake". He said: "We abhor terrorism in all its forms and we categorically refute any allegation of links to terrorism."

A spokesman for the government confirmed that: "The UK is seeking further clarity from the Emirates on their rationale for some of these designations, and any practical implications."

A spokesman for DEC, an umbrella organisation for a range of charities, said Islamic Relief would remain a DEC member as the UAE had not offered any evidence that it had failed to uphold humanitarian standards in the delivery of aid.

Last week, the UAE released a list of 83 proscribed organisations which included three British charities: Islamic Relief, the Muslim Association of Britain and the Cordoba Foundation.

Leaders of the Muslim Association of Britain and the Cordoba Foundation think-tank have both denied any links with terrorism and say they are considering legal action against the Emirates government.