A small Christian congregation has won a two-year battle to gain charitable status in a case which could have had a knock-on effect on strictly Orthodox Jewish groups.

The Charity Commission has finally agreed to register the Preston Down Trust in Devon, which belongs to the Plymouth Brethren sect, after rejecting its application in 2012.

The case arose from a change to the law in 2006, which removed the presumption that promoting religion was a public benefit: instead, religious charities would have to show that they were contributing to the common good.

In a letter to Attorney-General Dominic Grieve about the Preston Down case, a commission official had suggested that the rule change could affect other communities including “Messianic and Hasidic Jews”.

The letter referred to “closed communities or exclusive groups”.

Without charitable status, organisations would suffer financially by being unable to claim tax relief on donations.

In its decision this month, the commission noted that the practices of the Plymouth Brethren resulted in “both a moral and physical separation from the wider community”.

But Preston Down had been able to demonstrate “a beneficial impact in society” through street preaching, providing public access to worship and fundraising for disaster relief.

The commission had also been worried by the trust’s disciplinary practices which included “socially isolating members who have not complied with strict codes of behaviour”.

It had seen evidence that “individuals who had left the church were prevented from having regular contact with family members who remained in the church, including parents and children”.

But it said that Preston Down Trust had acknowledged “past mistakes” and agreed to emphasise “compassion” in future.

In a statement, the Plymouth Brethren said the decision had come as “a great relief”.