• Subsidy Control

    This page explains Subsidy Control, formerly referred to as State Aid.

    Information on Subsidy Control, how it has superseded and incorporates State Aid limits and business responsibility to stay within those limits. Links to further information from government.

What is a 'subsidy' (formerly referred to as State Aid)?

Under the Trade and Co-operation Agreement (TCA) with the European Union (EU), a 'subsidy' is broadly similar to what was previously referred to as 'State Aid'. The UK Government will be implementing a national system of 'subsidy controls', similar to the current EU system of 'State Aid rules'.

A subsidy is any advantage granted by public authorities through state resources on a selective basis to any organisations that could potentially distort competition and trade in the European Union and Northern Ireland.  

The Covid-19 Temporary Framework still refers to 'State Aid'. Any award under the Covid-19 Temporary Framework which was previously considered to be 'State Aid' is very likely to also be classed as a 'subsidy'.

The definition is very broad because 'an advantage' can take many forms. It is anything which an undertaking (an organisation engaged in economic activity) could not get on the open market.

Gov.uk - Guidance on State Aid

Do State Aid rules still apply since the UK left the EU?

The TCA sets out principles around subsidy control, as agreed between the UK and the EU. Some of these principles are broadly similar to the previous State Aid rules.

For the avoidance of doubt, the TCA enables Local Authorities to still pay out subsidies under previously approved State Aid schemes, as these will be in line with the principles set out in the TCA. This includes subsidies related to Covid-19 that have previously been given under the Temporary Framework. However, any award must comply with the rules and guidance governing for Covid-19 relief under the Temporary Framework.

Gov.uk - Complying with the UK’s international obligations on subsidy control: guidance for public authorities.

What rules are applicable to receiving Covid-19 related government grant funding during the Covid-19 crisis?

Following the coronavirus outbreak, the European Commission approved schemes to aid affected businesses based on their State Aid Temporary Framework, including the COVID-19 Temporary Framework (European Commission web site) measure for the UK. This enabled Local Authorities to distribute Covid-19 grants made available by the government, which complied with the EU rules around State Aid.

Covid-19 grant payments such as Local Restrictions Support Grant and the Additional Restrictions Grant can be provided under the existing de minimis rules, to any one organisation over a three fiscal year period, provided doing so does not exceed the €200,000 threshold.

Payments made where the de minimis threshold has been reached may be paid under section 3.1 of the Covid-19 Temporary Framework for UK authorities. The amended Temporary Framework enables EU Member States to give up to the nominal value of €800,000 per company. This can be combined also with so-called de minimis aid (to bring the aid per company up to €1 million) and with other specific types of aid.

This can be converted into pounds using the appropriate exchange rate published monthly by the European Commission.

Any business that has reached these limits may only receive further grant funding if the conditions set out in Section 3.12 of the amended European Commission Temporary Framework (Fourth Amendment) are met. This new measure was incorporated into the Covid-19 Temporary Framework for UK authorities on Tuesday 8 December 2020.

A business to be granted aid under Section 3.12 of the Temporary Framework for UK authorities must meet the following conditions:

  • The aid covers "uncovered fixed costs" which have been incurred during the period between 1 March 2020 and 31 December 2020. These are defined as costs which are not covered by the profit made by an organisation between 1 March and 31 December 2020, and have not been covered by other sources, such as insurance, other aid, or support from other sources (as set out in paragraph 87c of the amended European Commission Temporary Framework (Fourth Amendment).
  • The organisation has suffered a decline in turnover of at least 30% compared to the same period in 2019. The calculation of losses will be based on audited accounts or official statutory accounts filed at Companies House, or approved accounts submitted to HMRC which includes information on the businesses profit and loss.
  • The aid must not exceed 70% of the undertaking's uncovered fixed costs, except for micro and small enterprises (within the meaning of Annex I of the General Block Exemption Regulation) where the aid must not exceed 90% of the uncovered fixed costs.
  • The overall aid to an undertaking under this measure must not exceed €3 million per undertaking; all figures used must be gross, that is, before any deduction of tax or other charge.
  • Aid under this measure may not be granted to undertakings that were already in difficulty (within the meaning of the General Block Exemption Regulation4) on 31 December 2019.
  • The aid under this measure cannot be cumulated with other aid for the same eligible costs
  • The aid is granted before 30 June 2021.

What information do I need to supply to be granted aid in line with the Covid-19 Temporary Framework rules?

When submitting your application for a Covid-19 related grant support (such as the Local Restrictions Support Grant, Additional Restrictions grant or other one off payments including the Christmas Support Payment) we will ask you to confirm, that by receiving this grant aid you will not exceed the relevant State Aid thresholds.

The Local Authority must be satisfied that all State Aid requirements have been fully met and complied with when making grant payments, including, where required, compliance with all relevant conditions of the EU State Aid de minimis regulation, the EU Commission Temporary Framework for State Aid measures to support the economy in the current COVID-19 outbreak, the approved COVID-19 Temporary Framework for UK authorities, and any relevant reporting requirements to the EU Commission.

Should our due diligence checks highlight you have exceeded the limits we shall contact you and ask you to complete a detailed statement of aid received. A template can be downloaded from the bottom of this page.

If you are applying for the additional aid under Section 3.12 of the amended European Commission Temporary Framework (Fourth Amendment), you need to supply the necessary documentation including a detailed statement of aid received at the same time as submitting your grant application. A template can be downloaded from the bottom of this page.

You must also declare that you were not an undertaking in difficulty on 31 December 2019 and are not in administration, insolvent or subject to a striking-off notice.

The Local Authority is reliant on you to provide correct and timely information on what subsidies (including those previously referred to as 'State Aid') your company has received. Therefore, it is very important that you take care to ensure that the information provided to the local authority is accurate and up to date, particularly if your company may be coming close to the limits allowed under the Temporary Framework.  

If your company has accepted Covid-19 aid or relief from the local authority which has caused your organisation to exceed the limits of aid as allowed under the Temporary Framework, the local authority shall be entitled to recover any such payments from you (which may include a requirement to pay interest).

Further information is available at:

Business Growth Hub

GC Business Growth Hub

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