A community group has been forced to give up running a city council-owned sports hall after nearly three years - because the council has landed it with an unexpected £20,000 bill.

From right, Robert Evans, Julien Boucher, Pat Green and Trisha Elphinstone of Oxford's African Caribbean Community Action Network

Oxford City Council said Oxford's African Caribbean Community Action Network (ACCAN) owes £19,945 in VAT accrued in running costs and wages for a seconded staff member at East Oxford Games Hall.

The council has also threatened to pull the plug on a £20,000 development grant to ACCAN unless it pays the money.

The city council said it handed over responsibility for the hall to ACCAN on the basis that the group retained income from hiring it out in return for meeting running costs.

In a report, grants development officer Nicola Harrison stated that while income was steady at £20,000 per year, running costs had exceeded income and the bill had built up from VAT and seconded staff wages.

ACCAN said the bill came "completely out of the blue" and that it would never have agreed to take over the Collins Street hall - which has badminton, basketball, gymnastics and martial arts facilities - had it known it could face such costs.

The council has admitted it did not draw up a lease or contract setting out the conditions and East Oxford councillors have now called for the council to foot the bill.

Robert Evans, ACCAN's communications director, said: "When we moved in, the sports hall caretaker was seconded to us and we took care of his wages.

"A year later, we received a tax bill for £10,000. We thought there might have been a mistake or that we could claim it back as a voluntary organisation.

"But then last year, we found out the bill had increased to its current balance and we started to receive debt enforcement threats from the council.

"The only reason we took over running the centre was because we were desperate for a base for our organisation. We would never have agreed if we'd known we could face these costs.

"We asked for a lease to be drawn up, but nothing ever came of it.

"As far as we were concerned, things were going extremely well."

Speaking at an east area parliament meeting on Wednesday, St Mary's ward city councillor Sid Phelps said: "What the hell was the council doing allowing any community group to move into a council-owned building without setting up a lease?

"It appears ridiculous to me."

A council spokesman said the issue would be discussed by its executive board in September.