A leading charity today described reports that VAT waived from the Haiti earthquake charity single was to be clawed back by the Treasury as "extremely disappointing".
Stars including Cheryl Cole and Robbie Williams sang on February's hit record, which was given the special tax treatment by Gordon Brown to help boost sales.
But the Independent newspaper reported that the Treasury was to claw back the lost revenue from the Department for International Development (DfID).
Max Lawson, Oxfam head of development finance, said: "It will be extremely disappointing if Malawi or Mozambique end up paying for the public's generosity by picking up Haiti's VAT bill."
But Downing Street released a statement which read: "The story is wrong. No money raised for Haiti will be deducted from other development projects or the DfID budget."
Number 10 said DfID would be reimbursing the initial cost of the VAT for the single, but had an agreement with the Treasury that "they will provide additional end-of-year financing to cover that cost".
"There will therefore be no impact at all on other areas of DfID's work or budget."
The single, a cover of REM song Everybody Hurts, sold more than 600,000 copies.
Proceeds were split between the Disasters Emergency Committee (DEC) and The Sun newspaper's Helping Haiti campaign.
The Independent quoted a DfID official as saying "it was a bloody cheek" for the Treasury to deduct the waived VAT from its £6 billion budget.
Liberal Democrat foreign affairs spokesman Edward Davey told the paper: "This sleight of hand is a step too far. People who bought this CD in good faith will be disgusted to find out what the Prime Minister presented as an act of generosity was little more than the daylight robbery of funds intended to help some of the poorest people in the world.
"Gordon Brown must come clean on what aid programmes have suffered in order to fund this hollow gesture."
More than 200,000 people were killed when impoverished Caribbean republic Haiti was hit by a magnitude 7.0 quake in January.
Pop and TV mogul mogul Simon Cowell masterminded the charity single effort, which was publicly backed by Mr Brown.
This week countries and international organisations pledged more than £6.5 billion to rebuild Haiti.
It also emerged that former Doctor Who actor David Tennant was approached to play International Development Secretary Douglas Alexander in a theatrical dramatisation of the aftermath of the Haiti quake.
But Mr Tennant was unavailable for the role at a London theatre, the Times newspaper reported.
Nobody from DfID was available for comment.
Andrew Mitchell MP, shadow international development secretary, said: "This sleight of hand trick is sadly another example of Gordon Brown's willingness to deliberately mislead the public in order to get a good headline.
"It is all the more regrettable because the matter at hand is so serious, and the British public have been so generous.
"He should have simply been straight with people from the outset, rather than giving the impression that this was about additional money for humanitarian relief."
An Oxfam spokesman later said the charity was pleased Downing Street had pledged not to take the money from DfID's aid budget.Reuse content