Subsidy Allowance overview

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

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 (EU) and Northern Ireland.  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. Under the Trade and Co-operation Agreement with the EU (TCA), a ‘subsidy’ is broadly similar to what was previously referred to as ‘State Aid’. 

However, in simple terms, there are four key characteristics of a support measure that are likely to indicate that it would be considered a subsidy, which all need to be met:

  • a subsidy must constitute a financial (or in kind) contribution such as a grant, loan or guarantee
  • in addition, the financial contribution must be provided by a ‘public authority’, including, but not limited to, central, devolved, regional or local government
  • thirdly, the award of the subsidy must also confer a benefit on the recipient in the sense of an economic advantage that is not available on market terms
  • finally, the subsidy must cause a distortion in or harm to competition, trade or investment

UK Subsidy Rules post exit from the European Union

The EU State aid rules no longer apply to subsidies granted in the UK following the end of the transition period and the UK's exit from the European Union on 31 December 2020. This does not impact the limited circumstances in which State aid rules still apply under the Withdrawal Agreement, specifically Article 10 of the Northern Ireland Protocol and Article 138 in relation to aid for ongoing EU programmes and activities within the UK’s share of the previous Multiannual Financial Framework (2014 to 2020). The United Kingdom remains bound by its international commitments, including subsidy obligations set out in the Trade and Cooperation Agreement (TCA) with the EU.

BEIS have published guidance for public authorities explaining the subsidies chapter of the TCA, World Trade Organisation rules on subsidies, and other international commitments can be found on the GOV.UK website. This guidance is designed to help to understand the UK’s international commitments on subsidy control, such as what can be provided within the Small Amounts of Financial Assistance Allowance, Article 364 of the TCA, in advance of the development of the UK’s own subsidy control regime. 

What is the current UK Subsidy allowance threshold? (Known as Small Amounts of Financial Assistance)

The TCA has ‘value’ thresholds whereby the subsidy chapter does not apply to certain subsidies based on the value of the subsidy or do not apply to subsidies valued at below a certain amount, known as the Small Amounts of Financial Assistance (SAFA).

Under SAFA, a business at economic actor level (for example a holding company and its subsidiaries) can receive up to 325,000 Special Drawing Rights, which is an IMF unit,  over a three-year period (consisting of the current financial year and the previous two years). The special drawing rights can be converted into UK Pound Sterling using the Special Drawing Right calculator as the value can change on a daily basis. For example, on 9 December 2021 it equated to £343,000.

Please note it is the responsibility of the business, to check that it is eligible, and by the very nature of applying for or accepting a subsidy (such as Retail, Hospitality and Leisure Business Relief) you are declaring that the business will not exceed the permitted subsidy allowance threshold. If you have any doubt as to your position you must seek appropriate advice before applying for or accepting the subsidy as the responsibility lies with the business.

Additional Subsidy Allowances in response to the COVID-19 economic support packages

In March 2021, the government introduced new subsidy allowances for the COVID-19 business grants schemes, on the basis of the principles set out in Article 3.4 of the TCA. These allowances have strict criteria for eligibility and rely on businesses demonstrating compliance with the key principles during the grant application process.

The government revised these new subsidy allowances during December 2021 in relation to the announcement of additional economic support, namely the Omicron Hospitality, Leisure and Accommodation grant to help businesses who have been most impacted by the Omicron variant.

Further information on subsidy allowances to support COVID-19 Business Grant applications is available.

Additional Subsidy Allowances in response to the COVID-19 Additional Relief Fund linked to Business Rates

The government also introduced further subsidy allowances in December 2021 to support businesses, enabling them to receive a relief to reduce chargeable amounts of Business Rates payable in 2021/2022 known as the COVID-19 Additional Relief Fund (CARF). This relief was introduced to support those businesses affected by the pandemic but yet to receive any business rates support.

Further information on subsidy allowances to support COVID-19 Additional relief Fund applications is available.

Examples of recent subsidies awarded

This has included (but is not exhaustive to):

  • Retail, Hospitality and Leisure business rate relief
  • Discretionary Rate Relief
  • COVID-19 Business Grant Support
  • Retail Relief in 2019/2020
  • Plus, other assistance under the EU State aid de minimus limit

However please note the Extended Retail Discount granted in either 2020/2021 or 2021/2022 does not count in the subsidy allowance calculation.

Proposed UK Subsidy Control Legislation

The government is bringing forward legislation for a new, tailored UK-wide subsidy control framework, known as Subsidy Control. This was introduced to Parliament on 30 June 2021. This aims to reflect our strategic interests, strengthen our union, and help to drive economic growth and prosperity across the whole of the UK as we build back better from the pandemic.  

Read more information about the UK Subsidy Control Bill.

Prevention of Fraud

It is the applicant’s responsibility to check eligibility, and by the very submission of an application, are declaring that if awarded some form of subsidy that they are complying with and will not exceed the relevant permitted allowance thresholds. Where there is any doubt, it’s advisable to seek professional advice prior to making any submission.

The government and Salford City Council will not tolerate any business falsifying their records or providing false evidence to gain this discount, including claiming support above these thresholds. A ratepayer who falsely applies for any relief or provides false information or makes false representation in order to gain relief may be guilty of fraud under the Fraud Act 2006.

Transparency of Subsidies Awarded by Local Authorities

Local Authorities are required to ensure the transparency obligations under Article 369 of the TCA are complied with. That is

  • If the subsidy is awarded under the Small Amounts of Financial Assistance Allowance, LAs must ask the recipient whether, when cumulated with any de minimis EU State Aid or Small Amounts of Financial Assistance under the TCA that the business has received in the last three years, the relief will mean that the recipient has received more than 325,000 Special Drawing Rights. If it has, then the relief must be declared on the BEIS transparency database.
  • If the relief is awarded under the COVID-19 Business Grant Subsidy Allowance or the Additional Relief Fund Allowance, Local Authorities must ask the recipient whether, when cumulated with any other support received under the allowances, the recipient has received more than £500,000. If it has, then the relief must be declared on the BEIS transparency database.

Access the transparency database.

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