State aid overview
The EU State aid rules (which still apply to the UK during the Brexit transition period) limit the state resources that can be used to provide assistance to organisations, in order to ensure aid is well targeted and avoid negative effects on competition. This is why applicants are asked to confirm that the limits are not exceeded when applying for certain grants or loans.
Some types of State aid, including aid to SMEs, can be provided under the General Block Exemption Regulation (GBER), which does not require the normal notification and approval processes.
A De Minimis Regulation allows small amounts of aid - less than €200,000 over three rolling years - to be given to an undertaking for a wide range of purposes.
Member States can also grant ‘Notified State Aid’ (pre-approved by the European Commission) to specific entities. For example, in relation to tax incentives, the Enterprise Investment Scheme and Venture Capital Trust tax reliefs are approved State aids with an annual investment limit per company of £5 million (£10 million for knowledge-intensive companies), whilst the Seed Enterprise Investment Scheme is a De Minimis State aid.
If a company receives De Minimis assistance, the amount it can receive as Notified State aid is reduced accordingly.
Temporary Framework during COVID-19 crisis
The European Commission has approved a Temporary Framework (until 31 December 2020) to enable Member States to support economies during the COVID-19 crisis. The Temporary Framework provides for the following types of aid:
- Direct grants, equity injections, selective tax advantages and advance payments of up to €800,000 to a company to address its urgent liquidity needs.
- State guarantees for up to 90% of loans (100% for loans of up to €800,000) to help companies cover immediate working capital and investment needs.
- Subsidised public loans to companies with favourable interest rates, to help businesses cover immediate working capital and investment needs. Zero-interest rates are possible for loans with a nominal amount up to €800,000.
- Safeguards for banks that channel State aid to the real economy.
- Public short-term export credit insurance.
- Support for Coronavirus-related research and development to address the current health crisis in the form of direct grants, repayable advances or tax advantages.
- Support for the construction and upscaling of testing facilities to develop and test products useful to tackle the Coronavirus outbreak, in the form of direct grants, tax advantages, repayable advances and no-loss guarantees.
- Support for the production of products relevant to tackle the Coronavirus outbreak, in the form of direct grants, tax advantages, repayable advances and no-loss guarantees.
- Targeted support in the form of deferral of tax payments and/or suspensions of social security contributions for those sectors, regions or for types of companies that are hardest hit by the outbreak.
- Targeted support in the form of wage subsidies for employees for those companies in sectors or regions that have suffered most from the coronavirus outbreak, and would otherwise have had to lay off personnel.
Member States can combine all support measures granted under the Temporary Framework with De Minimis aid. However, Member States must avoid undue cumulation of support measures for the same companies to limit support to meet their actual needs.
UK measures approved under the Temporary Network
The EC has approved the following UK COVID-19 support measures:
- The Coronavirus Business Interruption Loan Scheme (CBILS), which provides:
- Guarantees to cover 80% of loan facilities of up to £5 million for SMEs with a turnover of up to £45 million to cover working and investment capital needs, implemented through the British Business Bank
- Direct grants of up to €800,000 to support SMEs affected by the coronavirus outbreak.
These schemes will initially run until 30 September 2020, with the possibility for the UK to extend them until 31 December 2020.
- The £50 billion “umbrella” UK scheme to support SMEs and large corporates, which provides:
- Direct grants, equity injections, selective tax advantages and advance payments of up to €800,000 to a company to address its urgent liquidity needs
- State guarantees for loans, including the Coronavirus Large Business Interruption Loan Scheme (CLBILS), which will provide guarantees to cover 80% of loan facilities of up to:
- £25 million for businesses with a turnover from £45 million - £250 million
- £50 million (to be increased to £200 million from 26 May 2020) for businesses with a turnover of over £250 million
- Subsidised public loans to companies with favourable interest rates
- Support for Coronavirus-related research and development (R&D)
- Support for the construction and upscaling of testing facilities to develop and test products useful to tackle the Coronavirus outbreak
- Support for the production of products relevant to tackle the Coronavirus outbreak.
COVID-19 support measures not subject to State aid rules
The Coronavirus Job Retention Scheme does not constitute State aid, as it is a measure available to all businesses.
The Future Fund does not constitute State aid, as it was designed as funding which exactly matches the independent market.
The government also considers that the following generally available facilities are not subject to the State aid rules:
• The business rates expanded retail, leisure and hospitality discount 2020-21
• The VAT deferral facility
• Direct tax deferral facilities, including Time To Pay arrangements.
Some COVID-19 support measures are not subject to the State aid limits, and there are separate limits for the measures which are subject to the rules:
|Not subject to State aid limits
||De Minimis three-year limit
||Temporary Framework (until 31.12.2020)
|| €800,000 limit
|Coronavirus Job Retention Scheme
||Payments under Small Business Grant Fund (or under Temporary Framework if grant would result in €200,000 limit being exceeded)
Self-employment Income Support Scheme
|Fishery and aquaculture sector: €120,000
||R&D SME relief (read more)
|| Statutory Sick Pay relief package for small and medium sized businesses (SMEs)
|| Agricultural products: €100,000
|Direct tax deferrals, including Time To Pay arrangements
||NIC Employment Allowance
||Payments under Retail, Hospitality & Leisure Grant Fund
|Business rates expanded retail, leisure and hospitality discount 2020-21
||Coronavirus Business Interruption Loan Scheme
|Future Fund loans. Note: investors will not be entitled to EIS/SEIS relief if they make a Future Fund loan to a company.
||Social Investment Tax Relief investments (alternatively, may come under GBER, depending on the date of the first commercial sale and the trading activity)
||Coronavirus Large Business Interruption Loan Scheme
Research and Development Expenditure Credit Scheme Note: lower limits apply to the fishery and aquaculture sector (€30,000) and agricultural sector (€20,000)
View our COVID-19 hub