The Bluefrog Blog

You may have seen this recent blog article or other posts related to it:

Why I had to close Bluefrog down (and why I set up Bluefrog Fundraising)

We thought it would be helpful to pass on our observations as we know there has been some confusion about the content of the blog.

We have no reason to doubt it has not been written in good faith and is a fair representation of the customers’ experience with HMRC. It does however contain statements which are inaccurate or open to misinterpretation.

With reference to the following paragraphs:

“The whole idea of a package test was completely changed. Under the new interpretation, as an agency, if you provide a service to a charity that is subject to VAT, it is subject to VAT – no arguments. This means things like creating an ad or a mailing pack need VAT charged on them at the standard rate.”

The “package test” is a method for determining the VAT status of packages of printed matter. Most direct mail packs fall within the scope of the package test. Nothing at all has changed regarding the rules or application of the package test therefore this statement is incorrect. Furthermore, charity advertising and mail packs which meet appropriate criteria may be zero rated. The blog author makes a generalised statement that such supplies are always subject to VAT which is not the case.

“The good news for charities is that the onus to pay any wrongly assessed VAT falls to the supplier.”

This statement could be construed as meaning charities are immune to any retrospective VAT charges. Whilst it is true that the repayment of VAT arrears rests with the supplier, that does not mean the supplier will not attempt to recoup the VAT from their clients. They may indeed have a contract clause that allows them to do just that.

‘”We simply could not afford to pay the sums owing…The company never received the VAT payments that HMRC wanted to reclaim.”

Unable to pay the sums owing, Bluefrog Ltd ceased trading and now there is Bluefrog Fundraising. Changes like this are commonly called ‘phoenixing’. Use this link for more information. https://www.gov.uk/government/publications/phoenix-companies-and-the-role-of-the-insolvency-service/phoenix-companies-and-the-role-of-the-insolvency-service

We trust this clarifies matters should any of your customers raise questions arising from this article. Please feel free to contact us for further information.

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