The Charity Commission has dismissed claims that Muslim Aid has "terrorist links," despite an investigation which found it gave money to a charity with Palestinian links.

It investigated after the Daily Telegraph published concerns that the relief charity had made payments to eight organisations allegedly linked to Hamas and Palestinian Islamic Jihad. The charity denied this.

The commission found that, of all the organisations named as being supported by the charity, one - the Al-Ihsan Charitable Society - is "designated", which means financial restrictions were imposed in the UK in 2005.

It is a criminal offence to make funds available to such organisations without a licence from the Treasury.

The report, published on Friday, found that Muslim Aid had given Al-Ihsan Charitable Society £2,500 in 2002 and £3,000 in 2003.

After looking into the charity's 2005 accounts, the commission found that £13,998 had been set aside for the Al-Ihsan Charitable Society that year, but not paid. The report said: "This was as a result of the financial sanctions imposed on the Al-Ihsan Charitable Society after the decision to provide funding had been made.

"The commission found no evidence of irregular or improper use of the charity's funds or any evidence that the charity had illegally funded any proscribed or designated entities."

The commission did not have enough evidence to carry out further investigations into payments to other organisations.