A small charity has managed to secure a full refund of the money it lost in the Icelandic bank collapse last year by claiming it was a retail depositor.

Kaupthing, Singer and Friedlander has returned £261,000 to the League of Friends of Brampton and District War Memorial Hospital, which had had the money tied up in the bank at the time of its collapse last year.

The charity had been concerned that it might only recover £50,000 of its savings, as per the government’s guarantee under the Financial Services Compensation Scheme, and pushed to receive the full amount. The deposit was a significant one for the charity which had an income of less than £80,000 in the financial year ending 31 March 2008.

The Cumbrian charity called on its local Conservative MP David McLean (pictured) to lobby for the return of the cash, and finally secured the refund by demonstrating to KSF that it qualified as a retail depositor.

Trustee John Holland said: "We had to answer an awful lot of questions to prove we were on the right side of the fence, which we did and that's taken quite a long time.

"That's partly responsible for the delay and I suppose it's only right that everyone is checked out so that we're paying the right people.”

Charities Aid Foundation recently lobbied the Treasury to establish a separate depositor class for charities in order to better protect charity reserves.

According to CAF, charities are currently defined as retail depositors if they meet one or more of the following criteria:

• a turnover of £6.5m or less
• £3.26m or less balance sheet total
• 50 or fewer employees
• they were an unincorporated association with assets of £1.4m or less