Kids Company had a tax bill of almost £590,000 waived by the government in 2003, it has been revealed.

The charity Kids Company has been subjected to media scrutiny in recent weeks after it was revealed that a memo from the Cabinet Office had called for the charity’s founder, Camila Batmanghelidjh, to step down from her role as chief executive, if it wanted to receive a £3m government grant.

A source involved with Kids Company at the time suggested to Civil Society News that Inland Revenue was faced with the option of winding up the charity or accepting partial payment for an outstanding tax liability.

The source suggested that the high-profile nature of the charity at the time, and its links with government officials, meant that winding it up was unacceptable.

The charity’s annual accounts for the year ending December 2003, which are filed with Companies House, show that the charity held negotiations at the end of 2002 with the Inland Revenue, which merged to become HM Revenue and Customs in 2005, regarding “arrears of employment taxes”.

In a section in the accounts with the subtitle “exceptional item”, it goes on to say: “It was finally agreed in July 2003 that all amounts due to 31 March 2003 would be waived with the exception of £100,000. The sum was paid, as agreed in 2003 by way of a donation from a supporter.”

A total of £589,957 was waived by Inland Revenue.

A spokesman from Kids Company said about the bill: “In 2002, there were a high number of vulnerable children with complex needs attending Kids Company who were not receiving statutory support. The organisation experienced a delay in making NIC payments to HMRC as resources were focused on meeting these vulnerable children's immediate needs.

“Kids Company worked with the HMRC to agree a partial payment of NIC. The HMRC recognised that their actions made a significant contribution towards helping support some of society's most at risk and vulnerable children.”

Batmanghelidjh said that the pressure on her to step down by government was “blackmail” and that she was being discredited by government because she had criticised current policies threatening the wellbeing of children.

The Charity Commission said last week that it was “urgently assessing” the charity’s funding position.

Batmanghelidjh has said she will be stepping down from her role as chief executive in 2016, after 20 years in the role, but will remain involved with the charity.

HMRC said it could not comment on the tax bill.