State Aid and Subsidy Allowances
There are limits to the financial support individual businesses can receive from the Government. Covid 19 Business grants need to be considered against these limits.
This was previously known as State Aid and arose from the European Union competition rules which prohibit the Government awarding State Aid to businesses because it can distort competition, which is harmful to consumers and companies in the European Union.
The EU State aid rules no longer apply to subsidies granted in the UK following their withdrawal from the EU and the end of the transition period, which ended on 31 December 2020. However, these have been replaced by a series of subsidy allowance schemes.
Details of the allowances are shown in the table below. You can find further information here.
| Subsidy | Allowance | Eligibility period | Details |
|---|---|---|---|
| De Minimis | €200,000 | 1 August 2020 – 7 December 2020 | The De Minimis threshold applied over a three fiscal year period. |
| COVID-19 Temporary Framework | €800,000 | 1 August 2020 – 7 December 2020 |
When the De minimis limit was reached, the COVID-19 Temporary Framework allowed payments up to €800,000. This could be combined with the De Minimis aid to bring the per company aid to €1,000,000. |
| Amended COVID-19 Temporary Framework | €4,000,000 | 8 December 2020 – 3 March 2021 |
If a business had reached its limit for aid under the De Minimis and COVID-19 Temporary framework, then it could apply for the amended COVID-19 Temporary framework. |
| Small Amounts of Financial Assistance Allowance (SAFA) | 325,000 Special Drawing Rights – equivalent to approximately £335,000 as of 2 March 2021 | 4 March 2021 onwards |
This allowance is to a single economic actor over any period of three fiscal years. The precise amount can be accessed via the Special Drawing Right calculator . |
| COVID-19 Business Grant Allowance | £1,600,000 | 4 March 2021 onwards |
Where the SAFA limit has been reached businesses can utilise the COVID-19 Business Grant Allowance for additional funding. This may be combined with the Small Amounts of Financial Assistance Allowance to equal £1,935,000. |
| COVID-19 Business Grant Special Allowance | £9,000,000 | 4 March 2021 onwards | Where the SAFA and COVID-19 Business Grant Allowance limits have been reached businesses can utilise the COVID-19 Business Grant Special Allowance to access further grant funding. |
State Aid
Although the United Kingdom left the European Union on 31 January 2020, under the terms of the Withdrawal Agreement, given effect to through the European Union (Withdrawal) Act 2018, the UK was in a Transition Period until 31 December 2020.
During this Transition Period, the EU State aid rules continue to apply in the UK. Accordingly, any aid granted during the Transition Period must comply with those rules.
There is an exemption that will allow the award of State Aid providing the value is below a "de minimis" level.
The EU state aid rules that applied were as follows: 200,000 Euros received over a three year period which covers the financial year, running from April 2020 to March 2021, and the two preceding financial years, plus 800,000 Euros received over the period March 2020 to December 2020 under the COVID-19 Temporary Framework.
For further information about what constitutes state aid, visit the GOV.UK website .
Subsidy Allowances
On Thursday 4 March 2021 new subsidy allowances (previously state aid) were established for the COVID-19 business grants schemes. The updated scheme rules do not apply retrospectively. The United Kingdom remains bound by its international commitments, including subsidy obligations set out in the Trade and Cooperation Agreement (TCA) with the EU. Guidance 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 or TCA document can be found on the European Commission website .
There are three subsidy allowances set out below:
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Small Amounts of Financial Assistance Allowance, the COVID-19 Business Grant Allowance and the COVID-19 Business Grant Special Allowance
Grants may be paid in accordance with Article 3.2(4) of the TCA, which enables an applicant to receive up to a maximum level of subsidy without engaging Chapter 3 of the TCA. This allowance is 325,000 Special Drawing Rights, to a single economic actor over any period of three fiscal years, which is the equivalent of £335,000 as at 2 March 2021 (The Special Drawing Right calculator can be used to calculate the exchange rate on the day the subsidy is awarded). An applicant may elect not to receive grants under the Small Amounts of Financial Assistance Allowance and instead receive grants only using the below allowances available under this scheme. -
COVID-19 Business Grant Allowance
Where the Small Amounts of Financial Assistance Allowance has been reached, grants may be paid in compliance with the Principles set out in Article 3.4 of the TCA and in compliance with Article 3.2(3) of the TCA under the COVID-19 Business Grant Allowance (subsidies granted on a temporary basis to respond to a national or global economic emergency). For the purposes of these scheme rules, this allowance is £1,600,000 per single economic actor. This allowance includes any grants previously received under the COVID-19 business grant schemes and any State aid previously received under Section 3.1 of the European Commission's Temporary Framework across any other UK scheme. -
COVID-19 Business Grant Special Allowance
Where an applicant has reached its limit under the Small Amounts of Financial Assistance Allowance and COVID-19 Business Grant Allowance, it may be able to access a further allowance of funding under these scheme rules of up to £9,000,000 per single economic actor, provided certain conditions are met.