Mr Farage has raked an average of £15,000 a year from the EU since at least 2009 to pay for the upkeep of his constituency office in Lyminster, near Littlehampton.
But the 625 sq ft office – a former grain store in Church Lane – was given to Mr Farage, 50, rent-free by local UKIP supports John and Julia Longhurst, more than a decade ago.
Mr Farage MEP for the south east of England confirmed he received his office rent-free to The Times but said he had legitimately spent more than £1,000 a month to run it.
However, The Times said that a former office manager had claimed the premises cost about £3,000 a year to run.
But in an interview with BBC Radio 4’s Today Programme this morning (Tuesday, April 15), Mr Farage rejected The Times’ report, saying it was an ‘outrageous’ and ‘politically motivated attack’ from, what he claims is, the ‘establishment paper’.
Speaking on Today, Mr Farage said: “We do not claim expenses for running an office or any other activity that takes place within our member state, the United Kingdom.
“We get an allowance, a fixed-rate allowance, and we can spend it how we see fit.”
Mr Farage continued by saying this allowance was of £3,580 a month
Guidelines set by the EU which recommends these fund be spent on rent, utilities, business rates and insurance.
But no MEP has to file receipts to prove how they have spent the cash, leaving the system open to abuse.
A local spokesman for UKIP was unavailable for comment.
However, a national spokesman told The Mirror that Mr Farage was ‘confident’ he had abided by European parliamentary rules at all times when spending allowances.
The spokesman said that the Lyminster address was not the only property which incurs expenditure in the pursuance of Mr Farage’s job as an MEP, with Mr Farage having to run a smaller officer at his home in Westerham, near Sevenoaks, Kent.
In recent weeks UKIP’s leader has clashed with the Liberal Democrat leader and Deputy Prime Minister Nick Clegg during two live television debates about, with a vast majority of the arguments surrounding the future of the UK’s involvement with Europe.
Antony Hook, Lib Dem MEP candidate for the south east said he is worried about Mr Farage EU expenses uses.
Speaking this afternoon, Mr Hook said: “I think that this is quite worrying.
“To be saying that everyone is conspiring against you – the press or the ‘establishment’ as Mr Farage says – without really answering the question in a straight and direct answer is very concerning.
“I think that’s a very dangerous tactic. If Mr Farage has a reasonable explanation for his expenses, he should just come straight out and tell us.
“This is in the public interest to know and I think his constituents have a right to know what he is claiming his expenses on.”
Figures for UKIP expenses are revealed on the party’s website in ‘transparency reports’.
However, UKIP MEPs have only filed the reports since July 2009.
Mr Farage says he is now seeking legal advice over the allegations concerning his use of EU expenses.
Previous reports said Mr Farage’s constituency office was in Bognor Regis, which was not correct.