Vote Leave campaign accuses Downing Street of ‘bully boy tactics’ as it argues that getting out of Europe will help the health service

Government lawyers acting on behalf of NHS England have threatened to sue the lead Brexit campaign group, Vote Leave, over its use of the NHS logo on its leaflets.

The Observer understands that a legal letter was sent on Saturday claiming the use of the trademark breaches guidelines. A spokesman for Vote Leave insisted it would not pull the leaflets and accused Downing Street of “bully boy tactics”, adding that Brexit would free up cash for a health service in “financial crisis”.

The anti-EU group has been selling and distributing leaflets and letters bearing the white capital letters on a blue background with the message to “Save our NHS” in the top right corner. Below a message to “Help protect your local hospital”, it also features Vote Leave’s slogan to “Vote Leave, take control” next to a red ballot box.

A central argument of the Vote Leave group – recently given backing by justice secretary Michael Gove, Commons leader Chris Grayling and culture secretary John Whittingdale – is that it wants to “stop sending £350m every week to Brussels and instead spend it on our priorities, like the NHS and science research”.

However, the Department of Health wrote to the campaign group last month after receiving complaints about the use of the NHS logo. Under brand guidelines, the NHS logo should be used only in its official communications in support of “core principles and values”.

It is understood that the correspondence from Department of Health officials was ignored by Vote Leave, whose campaign director is Gove’s former special adviser, Dominic Cummings.

Whitehall sources said the row had subsequently escalated, with lawyers being instructed to threaten legal proceedings, including a possible injunction on the use of the leaflets pending a trial. Other consequences threatened included the destruction of all infringing goods and the payment of damages to the Department of Health.

A spokesman for Vote Leave said the move was further evidence of bullying by Downing Street, which on Saturday was forced to deny suggestions the government might have also played a role in the British Chamber of Commerce’s (BCC) decision to suspend its director general, John Longworth, for making pro-Brexit remarks. At the BCC’s conference on Thursday, Longworth said Britain would be left “sitting on the margins” of an “unreformed EU” if voters chose to stay in the EU in the 23 June referendum.

Matthew Elliott, Vote Leave’s chief executive, said: “Business leaders like John Longworth should be able to speak freely about the dangers of staying in an unreformed EU. He made it clear he was speaking in a personal capacity – as many others will do throughout this debate. It is wrong for No 10 to attempt to gag business leaders. This is the most important debate for 40 years and everyone should be able to speak their mind without fear of retribution.”

A No 10 source said any claims about government officials having a role in the affair were not true. He added: “It is a matter for the BCC.”

A statement released on Friday by the BCC said it would not “be campaigning for either side ahead of the EU referendum. The BCC will survey chamber member companies across the UK, report their diverse views, and inform the debate”.

Government’s lawyers have insisted Vote Leave takes the leaflets out of public use by 8 March or it will face a legal battle. The DoH said: “We have informed Vote Leave this is an inappropriate use of the NHS brand.”