Subsidy allowances are limits to the amount of funding any one organisation or business can receive under the competition rules put in place by the government. The rules relating to these schemes form part of the Trade and Co-Operation Agreement reached between the United Kingdom and the European Union when the United Kingdom left the European Union. A ‘subsidy’ is broadly similar to what was previously referred to as State Aid.
A subsidy is an 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.
Examples of recent subsidies awarded includes (but is not limited to):
- COVID-19 Business Grant support
- Discretionary Rate Reliefs, including
- Retail Discount (2019/20)
- Retail, Hospitality and Leisure discount (2022/23)
- Enterprise Zone Relief
We may ask you to complete a subsidy allowance declaration to check if you are eligible for help under the grant schemes.
Small Amounts of Financial Assistance Allowance
Businesses can receive up to 325,000 special drawing rights (the equivalent of £343,000 at 9 December 2021) over a period of three fiscal years.
The Special Drawing Right calculator can be used to calculate the exchange rate on the day the subsidy is awarded.
If you have received more subsidy than the Small Amounts of Financial Assistance Allowance and have received any grants to help with COVID-19 restrictions, you may be able to receive additional subsidy through the COVID-19 Business Grant Allowance or Business Grant Special Allowance.
COVID-19 Business Grant Allowance
Businesses which have received more than the Small Amounts of Financial Assistance Allowance over a period of three fiscal years can receive an additional £1,600,000. This is known as the COVID-19 Business Grant Allowance and may be combined with the Small Amounts of Financial Assistance Allowance to equal £1,935,000 (subject to the exchange rates).
This allowance includes any grants previously received under the COVID-19 business grant schemes and any State aid previously received.
COVID-19 Business Grant Special allowance
If a business 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 up to £9,000,000 if the following conditions are met:
a) The Special Allowance covers only the applicant’s uncovered fixed costs incurred during the period between 1 March 2020 and 31 March 2022, including such costs incurred in any part of that period (‘eligible period’);
b) Applicants must demonstrate a decline in turnover during the eligible period 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 applicant’s profit and loss;
c) ‘Uncovered fixed costs’ means fixed costs not otherwise covered by profit, insurance or other subsidies;
d) The grant payment must not exceed 70% of the applicant’s uncovered fixed costs, except for micro and small enterprises (for the purposes of this scheme defined as less than 50 employees and less than £9,000,000 of annual turnover and/or annual balance sheet), where the grant payment must not exceed 90% of the uncovered fixed costs;
e) Grant payments under this allowance must not exceed £9,000,000 per single economic actor. This allowance includes any grants previously received in accordance with Section 3.12 of the European Commission’s Temporary Framework; all figures used must be gross, that is, before any deduction of tax or other charge;
f) Grants provided under this allowance shall not be cumulated with other subsidies for the same costs.
An applicant must be able to provide the necessary documentation to demonstrate it is eligible for funding under the COVID-19 Business Grant Special Allowance. We are required by the government to verify that an applicant can meet all the criteria set out before providing further funding under this allowance.
Grants provided in excess of the Small Amounts of Financial Assistance Allowance may not be granted to applicants that were defined as an ‘undertaking in difficulty’ on 31 December 2019. However, grants can be granted to micro or small enterprises (as defined above) that were already in difficulty on 31 December 2019 provided that they are not subject to collective insolvency proceedings.
Who the schemes apply to
These schemes apply at the level of economic actor, which is defined as ‘an entity or a group of entities constituting a single economic entity regardless of its legal status, that is engaged in an economic activity by offering goods or services on a market’.
‘Undertaking in Difficulty’
‘Undertaking in difficulty’ means an undertaking in respect of which at least one of the following circumstances occurs:
(a) In the case of a limited liability company (other than an SME that has been in existence for less than three years) where more than half of its subscribed share capital has disappeared as a result of accumulated losses. This is the case when deduction of accumulated losses from reserves (and all other elements generally considered as part of the own funds of the company) leads to a negative cumulative amount that exceeds half of the subscribed share capital. For the purposes of this provision, ‘share capital’ includes, where relevant, any share premium.
(b) In the case of a company where at least some members have unlimited liability for the debt of the company (other than an SME that has been in existence for less than three years) where more than half of its capital as shown in the company accounts has disappeared as a result of accumulated losses.
(c) Where the undertaking is subject to collective insolvency proceedings or fulfils the criteria for being placed in collective insolvency proceedings at the request of its creditors.
(d) Where the undertaking has received rescue aid and has not yet reimbursed the loan or terminated the guarantee or has received restructuring aid and is still subject to a restructuring plan.
(e) In the case of an undertaking that is not an SME, where, for the past two years:
(1) the undertaking's book debt to equity ratio has been greater than 7.5; and
(2) the undertaking's EBITDA interest coverage ratio has been below 1.0.
You can see more about subsidy allowances on GOV.UK