COVID-19 support and the EU-UK Trade and Cooperation Agreement

06 April 2021

The EU State aid rules no longer apply to subsidies granted in the UK following the end of the Brexit transition period, which ended on 31 December 2020, except in respect of measures which affect trade in goods and electricity between Northern Ireland and the EU.

However, the EU-UK Trade and Cooperation Agreement provides that each Party will ensure that the grant of a subsidy respects certain principles, to ensure that subsidies are not granted where they could have a material effect on trade or investment between the Parties.

General agreed exemptions include:

  • Small amounts of financial assistance to an entity of less than £335,000 over three rolling years 
  • A COVID-19 Business Grant Allowance of up to £1.6 million per entity (under the Temporary Framework which has now been extended until 31 December 2021)
  • A COVID-19 Business Grant Special Allowance of up to £9 million per entity, subject to the following conditions:
    • 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’);
    • 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;
    • ‘Uncovered fixed costs’ means fixed costs not otherwise covered by profit, insurance or other subsidies;
    • 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;
    • 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;
    • Grants provided under this allowance shall not be cumulated with other subsidies for the same costs.

These subsidies can be combined, to provide a maximum grant per entity of £10.9 million.

However, it should be remembered that the following COVID-19 support packages offered by the government are not treated as state aid:

  • Coronavirus Job Retention Scheme
  • VAT deferral 2020
  • Direct tax deferrals, including  Time To Pay arrangements
  • Business rates expanded retail, leisure and hospitality discount
  • Future Fund loans (Note: investors will not be entitled to EIS/SEIS relief if they make a Future Fund loan to a company).

For further details of available grants, see Business Support Package for January Lockdown and Direct Business Grants.