The UK's election watchdog is writing to Ukip asking for "clarification" about the rent-free office at the centre of a row over Nigel Farage's use of Brussels' allowances.
The Electoral Commission said it wanted to find out if the rent-free arrangement should have been declared as a donation by the party.
A spokeswoman said: "We are writing to the party to just ask for clarification around this office that has come to light.
"We just want to find out if anything needs to be reported that perhaps has not been."
Ukip leader Mr Farage has defended his use of MEPs' allowances and claimed he is the victim of a "political smear" following allegations about the money used to fund his constituency office.
According to Ukip's own figures Mr Farage spent almost £70,000 of the general expenditure allowance (GEA) on office costs since July 2009, but The Times reported the premises were provided rent free to the party leader.
Mr Farage said he was given the GEA "to spend as he sees fit" and added: " It is taxpayers' cash, which I spend to promote the campaign of getting Britain out of the European Union."
Individual MEPs or local party branches are required to report cash donations or non-cash benefits worth £1,500 or more under the rules on political funding administered by the Electoral Commission.
It is the latest development in the row over the office in a converted grain store in Lyminster, West Sussex.
According to transparency reports produced by Ukip, Mr Farage spent £69 ,500 of his MEP's allowance on office costs between July 2009 and December 2013, an average of almost £15,500 a year.
Ukip has disputed The Times' claim that the office cost closer to £3,000 a year to run.
In a letter reprinted on Ukip's website, Mr Farage's former office manager David Samuel-Camps - who was quoted in The Times - said running costs were around £700 - or £8,400 a year.
Mr Farage told Sky News that he was given a £3,580 monthly allowance, unlike the Westminster system where MPs had to claim expenses.
He said: "They are not expenses. We don't actually claim for anything. I have not claimed for an office, I have not claimed this figure of £1 5,000 (a year).
"The Times, who are the pro-establishment newspaper, have deliberately tried to conflate the expenses row in Westminster - where people have been using taxpayers' money to buy houses and make large capital gains - with the way the system in the EU works.
"I'm not defending this system, I want it to end. But I get given, as does every other British MEP, £3,580 every month to spend in the UK and in my constituency as I see fit.
"There are a list of allowable expenses - we can spend it on newspapers, we can spend it on books, we can spend it on subscriptions on periodicals, on hotel bills, on restaurant meals, on taxis on travelling or, if we want to, on an office as well."
He added: "We do not have to provide any receipts or any explanation for how that money is spent."
Asked what the money was spent on, when the office is rent-free, Mr Farage said: "The electricity bill is more than £3,000 a year, we have burglar alarms, we have insurance, we have a massive postbag and a mail bill that is growing by the week as the level of interest and support for our party and our campaign and our cause grows."
Pressed by Sky News' Dermot Murnaghan on why the electricity bill was so high the Ukip leader said it was for "running machines, running banks of computers, running photocopiers".
He said the lack of scrutiny of MEPs' expenditure was "how the European Union works, it's one of the reasons that I don't want us to be a member of it".
Mr Farage added: "I'm setting the example: I want to be sacked, I want every British MEP to be sacked, I want these allowances to end totally and I want us to have a referendum to get us out of the European Union.
"I have spent 15 years, I have travelled more miles, I have spoken at more meetings, I have worked harder across the UK than any other British MEP and without those allowances I couldn't have done the job."
He said the allegations made against him in The Times were a "political smear of the worst kind".
On BBC Radio 4's Today programme Mr Farage said he would consider allowing his use of the allowances to be independently scrutinised.
"If that would solve the argument, of course I would," he said.
"The real point, of course, here is that Ukip ultimately don't want any of these allowances, we don't want British MEPs costing the taxpayer all this money."
It was reported that an official complaint has been made about Mr Farage to the EU's anti-fraud office OLAF.
A spokeswoman for OLAF said the body was "aware of the reports" but did not confirm that Mr Farage's case was being examined.
Under the OLAF system any complaint would be assessed to see whether it fell within the body's power to act, if there was sufficient evidence to proceed and whether it fell within the organisation's "investigative policy priorities".
" It is only after such an initial assessment that OLAF decides whether or not to open an investigation," the spokeswoman said.
Writing in The Independent, Mr Farage claimed the Times had "grossly misled" the public with "vacuous" allegations.
He wrote: "The front page of The Times, the newspaper of the establishment and passionate supporter of David Cameron, has grossly misled the British public in its latest chapter of the smear campaign against me.
"A month or so ago it tried, via a politically motivated opponent of mine in the European Parliament, to start a different investigation into my use of EU money. The bureaucracy has belatedly announced - on Monday night - that there was no case to answer, not even enough evidence to request an investigation by Olaf, the European Commission's anti-fraud office. The very next day The Times opens-up another equally vacuous front.
"As a party we have been expecting this; Ukip is doing well in the polls and posing a threat to the status quo. This week's Times article is based on erroneous second-hand testimony and crass misinterpretation."
Mr Farage also denied transferring any of the money into offshore bank accounts in tax havens.
He said: "As if besotted, The Times have published the accusation that I have siphoned money to the Cayman Islands. This is utterly outrageous. "
Mr Farage's mention of a separate investigation into his use of EU money that has now been dismissed refers to a complaint made by Lib Dem MEP Edward McMillan-Scott about Ukip's use of allowances after a series of reports by The Times .
The European Parliament said on Monday that there was no further cause to investigate Mr McMillan-Scott's claims, according to Ukip's website.