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Subsidy Allowance

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 Relief
  • Retail, Hospitality and Leisure discount
  • Enterprise Zone Relief
  • CARF (Covid Additional Relief Fund)

However, please note Extended Retail Discount awarded in 2020/2021 or 2021/2022  does not count as a subsidy.

We may ask you to complete a subsidy allowance declaration to check if you are eligible for a business rate relief or discount.

What are the UK Subsidy Control rules?

On 4 January 2023, the UK’s new subsidy control regime came into force, implementing a new subsidy regulation framework designed for the post-Brexit era. Underpinned by the Subsidy Control Act 2022 (the “Act”), related statutory instruments and government guidance, the new regime aims to grant public authorities the power to design and award subsidies in an agile way while complying with the UK’s international commitments on subsidy control.

How can Local Authorities award a subsidy?

The published guidance document provides the framework for designing and giving subsidies in a way that is consistent with the Subsidy Control Act 2022, to be followed when assessing the grant of a subsidy.

How much subsidy can be awarded?

Firstly it is necessary to establish if the proposed support (known in the Act as ‘financial assistance’) is classed as a subsidy. This can be determined by answering four key questions as explained in the Subsidy Control rules quick guide.

If it is deemed a subsidy it can be applied under the following:

Minimal Financial Assistance (MFA)

For smaller value subsidy awards, MFA allows financial assistance of up to a maximum limit of £315,000 to be made to a single enterprise within a rolling period of three financial years (consisting of the current financial year and the two previous financial years), without the need to comply with the majority of the subsidy control requirements.

However, MFA requires a written declaration from the beneficiary confirming that the limit has not been exceeded before the subsidy can be awarded. This effectively mirrors the historic EU De Minimis regime but sets the threshold at a fixed sterling amount and at a significantly higher level than the EU's €200,000.

Service of Public Economic Interest (SPEI)

For essential services provided to the public, SPEI assistance allows public authorities to award low value subsidies without needing to comply with most of the subsidy control requirements. SPEI allows up to £725,000 of assistance to be awarded within a rolling period of three fiscal years, subject to obtaining a written declaration confirming that the threshold has not been exceeded.

Streamlined Routes

Streamlined Routes (also known as Streamlined Subsidy Schemes) are a type of subsidy scheme made by the UK government for use by any UK public authority.

The purpose of these routes is to enable public authorities to award routine, low risk subsidies in specified areas.

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 Discount) 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.

Transparency of Subsidies Awarded by Local Authorities

Local Authorities have a duty to publish details within 3 months of making an award on the Tansparency Database. However, awards of £100,000 or less made under MFA or SPEI are exempt from publication.

Access the Tansparency Database.

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’.   So, for example, where there are a number of companies within a group, the allowance is for the group as a whole, not for each individual company. 

‘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.

Further information

You can see more about subsidy allowances on GOV.UK