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Subsidy Control Allowance (formerly known as State aid)

Post 4 March 2021

Business grant payments made by Somerset West and Taunton Council, and other Councils, in response to the Covid 19 are subject to the subsidies chapter within the UK-EU Trade and Cooperation Agreement (TCA).

It is your responsibility to check that by claiming a COVID-19 related grant support (e.g. Our local Hospitality Support Grant , the national Omicron Leisure and Hospitality Grant etc.) that your business will not exceed the relevant permitted Subsidy Allowance thresholds and you meet any conditions associated with the subsidy measure(s) under which you are claiming the grant. Please note these limits apply to the total amount of support your business has received and not simply that which you have received from this council.

We would imagine most sole traders and local small businesses will be eligible to claim using the Small Amounts of Financial Assistance Allowance, an applicant may however elect not to receive grants in respect of that allowance, even where they have received significantly less than the allowance limit, and instead receive grants only using the below allowances available under this scheme.

The Council is however unable to offer advice concerning Subsidy Control. If you are unsure which of these subsidy allowance measures you should apply under you should seek appropriate professional advice from your accountant or similar professional specialist before you complete the application form.

Under the rules for COVID-19 business grants, the maximum level of subsidy that an economic actor (broadly speaking, for example, a holding company and any of its subsidiaries), may receive under each level of allowance is set out below. Note that in certain circumstances these allowances can be combined to give a higher total subsidy allowance limit total.

When submitting your application for a COVID-19 related grant support we will ask you to confirm which subsidy allowance measure(s) you are claiming under.

Measure 1 - Small Amounts of Financial Assistance Allowance (approx. £343,000 limit)

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. The value of this allowance fluctuates with exchange rates, but was £343,000 Pounds Sterling (GBP) on 1 Dec 2021 using the Special Drawing Right calculator.

Measure 2- COVID-19 Business Grant Allowance (£1,900,000 limit)

Where the Small Amounts of Financial Assistance Allowance has been reached (or the applicant has elected not to use this), 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 fixed at £1,900,000 per economic actor, and does not fluctuate with exchange rates. 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 Commission’s Temporary Framework across any other UK scheme. This may be combined with the Small Amounts of Financial Assistance Allowance to equal £2,243,000 (subject to the exact amount applicable under the Small Amounts of Financial Assistance Allowance using the Special Drawing Right calculator).

Measure 3 - COVID-19 Business Grant Special Allowance (£10,000,000 limit)

Where an applicant has reached its limit under the Small Amounts of Financial Assistance Allowance (or has elected not to use this) and COVID-19 Business Grant Allowance, it may be able to access a further allowance of funding under these scheme rules of up to £10,000,000 per economic actor (and does not fluctuate with exchange rates), provided the following conditions are met:

  • 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 £10,000,000 per applicant. 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.

For the avoidance of doubt, grants under the Small Amounts of Financial Assistance Allowance, the COVID-19 Business Grant Allowance and the COVID-19 Business Grant Special Allowance may be combined for a potential total allowance of £12,243,000 (taking into account all grants previously received under the COVID-19 business grants schemes and subject to the exact amount applicable under the Small Amounts of Financial Assistance Allowance (using the Special Drawing Right calculator)

If you are applying under the COVID-19 Business Grant Special Allowance we will have to ask you some additional questions and ask for you supply the necessary documentation to demonstrate your eligibility for this award. We will do this after you have submitted your application but before we can make a grant payment to you.

Grants provided in excess of the Small Amounts of Financial Assistance Allowance will not be granted to applicants that were defined as an ‘undertaking in difficulty on 31 December 2019 and applicants must declare to the Council if this is the case. In derogation to the above, 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.

‘Undertaking in difficulty’ means an undertaking in respect of which at least one of the following circumstances occurs:

  • 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.
  • 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.
  • 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.
  • 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.
  • 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.