Former sailor Chris Palmer, director of the County Durham Furniture Help Scheme, has received annual demands to fill out tax returns since his charity became a limited company in 2005, even though directors of not-for-profit companies should be exempt from making tax returns.
Palmer, who has lived on a war pension since 1970 and earns nothing from his charity work, has now been fined £100.
"The tax man kept insisting that I must have a salary," he said. "He didn't seem to understand the meaning of the word 'volunteer'."
A spokesman for HMRC said the organisation did not comment on individual cases but it aimed to avoid unnecessary administration for voluntary workers.