State aid

State aid is any advantage granted by a public body through state resources on a selective basis, to any organisations that could potentially distort competition and affect trade in the European Union (EU).

The definition of State aid is broad because ‘an advantage’ can take many forms. It is anything which an ‘undertaking’ (an organisation engaged in economic activity) could not get on the open market. State aid can sometimes provide an advantage to businesses at the expense of its rivals. By controlling State aid the European Commission can ensure that businesses across the EU are operating on a level playing field.

The UK is no longer part of the EU. State aid rules no longer apply except in very specific circumstances. This includes the disbursing of legacy EU funding and where a subsidy risks impacting upon the Northern Ireland Protocol. If you think your subsidy may come under either of these instances, or are unsure, please contact the Subsidy Control Unit (subsidycontrolunit@gov.wales).

Identifying State aid

When support is given out by a public body to an undertaking engaged in economic activity there are 5 tests to apply.

• Is the support granted by the state or through state resources?
• Is the support providing an advantage the undertaking wouldn’t otherwise have?
• Is the support selective (going to certain undertakings rather than others)?
• Is the support distorting, or threatening to distort, competition?
• Is the support affecting trade between EU member states?

If the answer to any of the questions is ‘no’, it is unlikely that the support is State aid. You will need to keep a record of how you reached your decision for 10 years in case the European Commission decides to investigate. If the answer to all the questions is ‘yes’, the support is likely to be State aid.

Exemptions from State aid

The European Commission accepts that sometimes States may need to intervene in a business. The State aid rules provide some exemptions where public authorities can award aid, including:

• Notified schemes
• de minimis
• general block exemption regulation schemes (GBER)
• services of general economic interest (SGEI)
• horizontal and sectoral regulations

These schemes can be used for the disbursement of EU structural funds only.

From 1st July 2016 the general block exemption regulation requires that the details of any individual provision of support with a value of €500,000 or over must be reported to the European Commission (EC) using its online reporting system. The EC will publish this on a publicly available database.

The Subsidy Control Unit will co-ordinate the process but will expect those providing support to notify the Subsidy Control Unit when an award of €500,000 or over has been made, within one month of the support being provided.

What we’ll need to know

To get the correct conversion rate, make sure you enter the date of award into the calculator.

• The name of the organisation receiving support.
• The organisation’s identifier - this should be their EU VAT number. If the recipient does not have one, then add their company, charity or academic registration number. If none of these are available, contact the Subsidy Control Unit (subsidycontrolunit@gov.wales) to confirm an appropriate identifier.
• The size of the organisation – i.e. small, medium or large.
• The region in which the organisation is located (NUTS 2 level)

  
  UKL1 West Wales and The Valleys includes:

  • Isle of Anglesey (UKL11)
  • Gwynedd (UKL12)
  • Conwy and Denbighshire (UKL13)
  • South West Wales (UKL14)
  • Central Valleys (UKL15)
  • Gwent Valleys (UKL16)
  • Bridgend and Neath Port Talbot (UKL17)
  • Swansea (UKL18)

  
  UKL2 East Wales includes:

  • Monmouthshire and Newport (UKL21)
  • Cardiff and Vale of Glamorgan (UKL22)
  • Flintshire and Wrexham (UKL23)
  • Powys (UKL24)

  
  Full list of NUTS 2 regions

• The organisation’s NACE code – NACE codes are for the statistical classification of economic activities in the European community

  
  Full list of NACE codes

• Amount of aid (in pounds sterling) - calculate the Euro (€) value of any aid given in pounds sterling (£) on the European Commission currency converter. To get the correct conversion rate, make sure you enter the date of award into the calculator.
• Type of aid – this might be a:
  • Grant or interest rate subsidy
  • Loan
  • Repayable advances or reimbursable grant
  • Guarantee
  • Tax advantage or exemption
  • Risk finance
• Date of granting of aid
• Aid objective - What will it be used for? What do you hope to achieve by granting the aid?
• Granting authority
• Reference for the aid measure used

The de minimis regulation covers aid amounts which the European Commission (EC) regards as too small to effect competition. It allows support below €200,000 over a 3 year period (the current and last 2 fiscal years).

Further information on Running a de minimis aid scheme.