The Lubavitch Foundation hopes by early next year to have finally cleared the debts which have led auditors to query the viability of the organisation.

In the last available accounts, for the year ending December 2007 — which were filed only this summer — auditors wrote of “material uncertainty which may cast significant doubt about the charity’s ability to continue as a going concern”.

The organisation still owed the Inland Revenue more than £462,000, according to the papers, and is believed still to be in negotiations with the tax authorities.

But Lubavitch sources said that a sale of assets is under way which is expected to help lift the charity out of the red.

Two years ago, after a bitter dispute within the Lubavitch hierarchy which ended up at a rabbinical court, it emerged that the charity was in debt by around £1.5 million.

The conflict resulted in the resignation of the organisation’s chief fundraiser for many years, Rabbi Faivish Vogel.

A new chief executive, Rabbi Bentzi Sudak, a son of Lubavitch principal, Rabbi Nachman Sudak, was recently appointed and a new set of trustees have come on board.

Rabbi Bentzi Sudak said this week that the trustees and new advisory board had “worked tirelessly to restructure the organisation prior to my appointment, clearing out its past debt and implementing new systems of transparency and accountability. They have provided a clean slate for me to begin my work”.

According to the 2007 accounts, the organisation’s reserves were almost £5 million in deficit — although that figure excludes restricted funds for special projects over £2.6 million, plus properties and other assets of more than £17 million. It spent more than £7 million on its educational and other activities that year.

Its 2008 accounts, which were due at the Charity Commission at the end of October, are expected to be signed off shortly, a Lubavitch source said.

The commission said that a further reminder had been sent last month after two previous requests for the accounts in summer.

Rabbi Bentzi Sudak’s appointment had been made by an independent panel which had looked at a number of candidates, a Lubavitch source explained.

Rabbi Sudak said: “My challenge is to continue to build and grow Chabad Lubavitch UK from its solid foundations. In the few short months since I took up my appointment there have been a number of extremely positive developments.”

They included, he said, the opening of a £2 million state-of-the-art children’s centre, a new £2.1 million building for the senior boys’ school, bought by a supporter, and the expansion of the fundraising team.

Rabbi Vogel has meanwhile become chairman for the Centre of Jewish Life, an independent social and educational club in the West End of London run by his sons Mendy and Yosef, who had also been with him at the Lubavitch Foundation.