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The watchdog said an official application “met the legal criteria”, despite leader Paul Golding holding convictions for a terror offence and hate crimes.
In a statement, Britain First vowed to field candidates in upcoming elections as a “fully-fledged political party”.
“This is a stupendous victory for the Britain First movement,” said an email to supporters.
“Although our street activities will continue, this day marks the birth of Britain First as a traditional political party that will take the fight to the establishment through the ballot box.”
Britain First was a political party from 2010 until it was deregistered by the Electoral Commission in 2017 for administrative reasons.
It became notorious for “mosque invasions” and other activism targeting Muslims, and was condemned by the government after Donald Trump shared Britain First tweets in 2017.
At the time, Britain First had a large following on Twitter and more than 2 million likes on Facebook, but the pages have since been removed.
Its official registration as a political party was announced on Monday, hours after Golding, 39, and his former deputy Jayda Fransen, 35, agreed to pay “substantial damages” to settle a libel case.
The High Court heard that they falsely claimed the Halal Food Authority and two employees were involved in funding terrorism in February 2017, and offered no defence to the resulting defamation claim.
Both Golding and Fransen were jailed for religiously-aggravated harassment in March 2018, after filming and harassing innocent Muslim victims they wrongly believed to be involved in a rape trial.
In May last year, Golding was convicted of an offence under the Terrorism Act for refusing to allow police access to his phone and computer when stopped while travelling back to the UK from Russia.
He is listed as the leader of Britain First on the Electoral Commission website, while treasurer Tim Burton was convicted of harassing an anti-hate crime campaigner in 2017.
The Independent understands that their convictions are not a bar to registering as a party official under electoral law.
The registration process does not include an assessment of political policies or views, although the Electoral Commission must check any constitution or membership policy under its public sector equality duty.
There have been previous calls for Britain First to be proscribed in the wake of attacks carried out by its supporters.
The Finsbury Park terrorist Darren Osborne had read material from far-right activists including Fransen and Golding before ploughing a van into Muslim worshippers in June 2017.
Days later, Britain First supporter Marek Zakrocki drove his car into a restaurant after telling his wife he wanted to “kill a Muslim” and was “doing this for Britain”.
The extremist, who was also carrying a kitchen knife and Nazi coin, had donated money to Britain First and police found the group’s flyers at his home.
An Electoral Commission spokesperson said: “The application to register Britain First as a political party has been approved. We assessed this application against the criteria set out in law, including consideration of public comments submitted to us. The party’s application met the legal criteria and the party has therefore been registered.”
In 2019, Britain First was fined more than £44,000 for multiple breaches of electoral law, including undeclared donations and a failure to provide proper financial records or accounts.
At the time, the Electoral Commission said it had shown a “disregard for the law” and a “disappointing lack of transparency into the party’s finances”.
Britain First attempted to bring a legal challenge against the Electoral Commission over its refusal to register the group as a political party in Northern Ireland, but the case was dismissed by a Belfast judge in March.