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New rules on grant subsidy allowances

New national rules on grant subsidy allowances came into effect on 4 March 2021, which recipients of Covid-19 business grants schemes need to follow.

These replace previous requirements to comply with EU state aid rules.

Here is a broad summary of those requirements. Grant applicants will need to consult their own financial advisers if they have any questions about whether they comply with the government’s new rules on subsidy allowances.

  • Under the ‘small amounts of financial assistance allowance’, a single economic actor must not receive more than £335,000 in grants over any three-year fiscal period.
  • In cases where this threshold is reached, there is a further ‘Covid-19 business grant allowance’ of a further £1,600,000 per single economic actor.
  • Beyond this threshold, there is a ‘Covid-19 business grant special allowance’ where applicants may be able to access a further allowance of funding up to a further £9,000,000 per single economic actor, subject to conditions.

State Aid and Subsidy Allowances

European Union laws restrict the amount of state funding businesses can receive. This includes government grants, loans or tax reductions. Local Restrictions Support Grants count towards your state aid allocation. The EU State aid rules no longer apply to subsidies granted in the UK following the end of the transition period, which ended on 31 December 2020. The EU state aid rules that applied: 200,000 Euros received over a three year period which covers the current 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.

Further information about what constitutes state aid visit GOV.UK website

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:

  • 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 Commissions Temporary Framework across any other UK scheme. This may be combined with the Small Amounts of Financial Assistance Allowance to equal £1,935,000.
  • 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.

New rules on grant subsidy allowances

New national rules on grant subsidy allowances came into effect on 4 March 2021, which recipients of Covid-19 business grants schemes need to follow.

These replace previous requirements to comply with EU state aid rules.

Here is a broad summary of those requirements. Grant applicants will need to consult their own financial advisers if they have any questions about whether they comply with the government’s new rules on subsidy allowances.

  • Under the ‘small amounts of financial assistance allowance’, a single economic actor must not receive more than £335,000 in grants over any three-year fiscal period.
  • In cases where this threshold is reached, there is a further ‘Covid-19 business grant allowance’ of a further £1,600,000 per single economic actor.
  • Beyond this threshold, there is a ‘Covid-19 business grant special allowance’ where applicants may be able to access a further allowance of funding up to a further £9,000,000 per single economic actor, subject to conditions.