One of Britain's leading Muslim charities has rejected allegations of links with Hamas after being banned by the Israeli government last week from operating in the West Bank.

Israeli Defence Minister Moshe Yaalon accused Birmingham-based Islamic Relief Worldwide of funnelling money to Hamas-controlled organisations.

But in a statement on its website, the charity said it "categorically denies having links with Hamas".

The charity, which raises more than £100 million a year and is supported by the UK's Department for International Development, gave more than £13 million in aid to Gaza and £1.5 million to the West Bank last year.

It said that it had worked in the Palestinian Territories for 16 years "with no impediment from the Israeli authorities". A spokesman added the organisation programmes covered a wide range of education and health care projects.

But an Israeli embassy spokesman claimed that "IRW funnels millions of dollars a year to Hamas institutions."

The decision to designate the charity "an 'unlawful association' is part of Israel's action to curb Hamas terror activity in the West Bank", he added.