EU state aid law and rules in the UK during Covid-19

Introduction

While the UK is no longer a Member State of the European Union, EU State aid rules continue to apply in the UK during the transition period. The UK Government has announced an unprecedented set of measures to support the economy in response to the COVID-19 crisis. To the extent the UK’s Government’s measures are not UK-wide, the devolved administrations in Wales, Scotland and Northern Ireland have all announced similar packages of measures. 

EU State aid law context

National State aid schemes (programs) introduced by EU Member States and individual aid granted by national instances must comply with the applicable EU State aid law. Member States may notify new schemes or grant aid in individual cases. These may be based, for example, on the European Commission's Temporary Framework, on the provisions of the Treaty (Art. 107(2) b) TFEU) on aid to rectify damages caused by exceptional occurrences or on the guidelines on rescue and restructuring aid for companies in difficulty. Further details can be found in the EU chapter.

National Public Support

UK-wide National COVID-19 Temporary Framework

Who is eligible for the aid?

UK-based small and medium sized enterprises (SMEs) and large corporates active in all market sectors.

What does the aid consist of?

The Framework is an umbrella scheme for UK State aid, with an estimated budget of £50 billion, allowing for the provision of:

  • Direct grants, equity injections, selective tax advantages and advance payments;
  • State guarantees for loans subject to safeguards for banks to channel State aid to the real economy; 
  • Subsidised public loans to companies with favourable interest rates; 
  • Support for COVID-19 related R&D; 
  • Support for the construction and upscaling of testing facilities to develop and test products useful to tackle the COVID-19 outbreak; and 
  • Support for the production of products relevant to tackle the COVID-19 outbreak.

Where to apply for the aid?

Aid is granted under the scheme either directly or, if it concerns guarantees on loans, through credit institutions and other financial institutions as financial intermediaries.

Is a notification to the EU Commission necessary?

The ‘umbrella’ scheme allows aid to be granted by UK authorities at all levels, including central government, devolved governments, local authorities and other bodies administering schemes involving state resources channeled through their own budgets. Where the aid concerns guarantees on loans, it will be granted through credit institutions and other financial institutions as financial intermediaries.

The application process depends on the individual scheme set up pursuant to the ‘umbrella’ scheme, for example, the Retail Hospitality and Leisure Grant Scheme is implemented under the ‘umbrella’ scheme and is administered by local councils.

Further remarks

No. The scheme was cleared by the Commission on 6 April 2020 under the amended Temporary Framework. Individual aid granted pursuant to the scheme does not need to be notified. Further information is available here. Any aid received under the Temporary Framework does not count towards an undertaking’s De Minimis aid allowance under Regulation (EU) 1407/2013. 


Retail, Hospitality and Leisure Grant Scheme  

Who is eligible for the aid?

Businesses in the retail, hospitality or leisure sector which are based in England and had a rateable value of under £51,000 on 11 March 2020. Properties eligible for the grant are those that are wholly or mainly being used as a hospitality, retail, or leisure venue, such as a  shop, restaurant, café, bar, pub, cinema, live music venue, estate agent or letting agency, assembly or leisure property (e.g. a bingo hall, sports club, gym or spa) or a hospitality property (e.g. a hotel, guest house or self-catering accommodation). 

What does the aid consist of?

The scheme provides businesses in the retail, hospitality and leisure sectors with a cash grant of up to £25,000 per property:

  • Businesses in these sectors with a property that has a rateable value of up to £15,000 may be eligible for a grant of £10,000.
  • Businesses in these sectors with a property that has a rateable value of over £15,000 and less than £51,000 may be eligible for a grant of £25,000.

Where to apply for the aid?

Eligible businesses do not need to do anything. Their local authority will write to them if they are eligible for this grant.

Is a notification to the EU Commission necessary?

No. The Retail, Hospitality and Leisure Grant Scheme can be paid under the UK-wide National COVID-19 Temporary Framework which was cleared by the Commission on 6 April 2020 (see above).Individual aid granted pursuant to the scheme does not need to be notified.

Further remarks

No


Small Business Grant Scheme  

Who is eligible for the aid?

All businesses based in England, businesses that occupy property, and businesses in receipt of either Small Business Rates Relief (SBRR) or Rural Rates Relief (RRR) as of 11 March 2020. For detailed eligibility criteria see paragraphs 16-23 of the Small Business Grant Fund and Retail, Hospitality and Leisure Grant Fund: Guidance for Local Authorities.

What does the aid consist of?

The Government reimburses local authorities to pay grants to eligible small businesses that already pay little or no business rates because of SBRR, RRR and tapered relief. Local authorities provide a one-off grant of £10,000 to eligible businesses to help meet their ongoing business costs.

Where to apply for the aid?

Eligible businesses do not need to do anything. Their local authority will write to them if they are eligible for this grant.

Is a notification to the EU Commission necessary?

Small Business Grant funding can be paid as De Minimis aid (€200,000 limit over 3 years), in which case no notification is necessary. However, where the De Minimis threshold is exceeded, it should be notified under the Temporary Framework.

Further remarks

Recipients eligible for the Small Business Grant Fund will not be eligible for the Retail, Hospitality and Leisure Grant.


Coronavirus Business Interruption Loan Scheme (CBILS) 

Who is eligible for the aid?

UK-based SMEs that: 

  • have turnover of no more than £45 million per year;
  • generate more than 50% of their turnover from trading activity; 
  • are in an eligible sector (i.e. not banks, insurers and reinsurers (but not insurance brokers), public-sector bodies, state-funded primary or secondary schools); 
  • have not received De Minimis state aid beyond €200,000 over the last three years; and
  • can show their business would be viable were it not for the pandemic.

For SMEs wishing to borrow £30,000 or more, they also need to confirm that their business was not classed as a business in difficulty on 31 December 2019. 

What does the aid consist of?

The CBILS helps SMEs to access loans and other kinds of finance up to £5 million. Under the scheme, the UK Government will guarantee 80% of the finance made by lenders to cover the working and investment capital needs of eligible SMEs. and will pay interest payments and any lender-levied fees for the first 12 months. 

The scheme is implemented through the British Business Bank, a national promotional bank but the loan is provided directly by the participating bank. The scheme provides the lender with a government-backed, partial guarantee against the outstanding balance of the finance. The borrower remains 100% liable for the amount borrowed. The maximum value of the facility provided under the CBILS is £5 million and the maximum length of the facility will depend on the type of finance applied for and will be up to 3 years for overdrafts and invoice finance facilities, and up to 6 years for loans and asset finance facilities.  

Where to apply for the aid?

The British Business Bank operates the CBILS via its accredited lenders. There are over 40 of these lenders currently working to provide finance to SMEs. Eligible businesses should apply directly via the participating lender’s website.  

Is a notification to the EU Commission necessary?

No. The CBILS was approved by the Commission under the Temporary Framework on 25 March 2020. Individual aid granted pursuant to the CBILS does not need to be notified.  

Further remarks

Further details about the scheme are available here.


Coronavirus Large Business Interruption Loan Scheme (CLBILS) 

Who is eligible for the aid?

UK-based large businesses with annual turnover of over £45 million that have not received support under the Bank of England’s COVID-19 Corporate Financing Facility. Businesses from any sector an apply, except banks, insurers and reinsurers (but not insurance brokers), building societies, public-sector bodies, and state-funded primary and secondary schools.

What does the aid consist of?

The scheme helps medium and large sized businesses to access loans and other kinds of finance up to £200 million. The UK Government will guarantee 80% of the finance to the lender. Businesses can apply for loans, revolving credit facilities (including overdrafts), invoice finance and asset finance. Lenders can provide up to 25% of the eligible business’‘ annual turnover subject to a maximum amount of £200 million. Finance is available from 3 months to 3 years. 

Where to apply for the aid?

There are 12 lenders taking part in the scheme including all the main retail banks. Eligible businesses should apply directly via the participating lender’s website. If one lender turns an applicant down, applicants can apply to other lenders in the scheme.   

Is a notification to the EU Commission necessary?

No. The CLBILs falls under the UK’s £50 billion ‘umbrella’ scheme cleared by Commission on 6 April 2020 under the amended Temporary Framework, which covers state guarantees for loans targeted at SMEs and large corporates. Individual aid granted pursuant to the scheme therefore does not need to be notified. 

Further remarks

Further details about the scheme are available here


COVID-19 Corporate Financing Facility (CCFF) 

Who is eligible for the aid?

All non-financial companies and their finance subsidiaries that make a material contribution to the UK economy. In practice, firms that meet this requirement would normally be: 

  • UK incorporated companies, including those with foreign-incorporated parents and with a genuine business in the UK; 
  • Companies with significant employment in the UK;
  • Firms with their headquarters in the UK;
  • Firms which generate significant revenues in the UK, serve a large number of customers in the UK or have a number of operating sites in the UK may also be eligible.

The facility is open to firms that can demonstrate they were in sound financial health prior to the shock (i.e. companies that had a short or long-term rating of investment grade or equivalent as at 1 March 2020).  

What does the aid consist of?

The CCFF is operated by the Bank of England to purchase short term debt issued by firms making a material contribution to the UK economy, which is designed to support these firms in paying salaries, rents and suppliers.

The scheme will operate for 12 months and for as long as steps are needed to relieve cash flow pressures on eligible firms.

Where to apply for the aid?

In order to make use of the facility, corporates should contact their bank. If their bank does not issue commercial paper, UK Finance has provided a list of banks that are able to assist on its website. The full rules of the scheme and guidance on how to apply is available on the Bank of England website. 

Is a notification to the EU Commission necessary?

No.

Further remarks

Further detail on eligibility criteria can be found here


Bounce Back Loan Scheme 

Who is eligible for the aid?

UK-based SMEs established before 1 March 2020 which have been adversely impacted by COVID-19. Businesses from any sector can apply, except banks, insurers and reinsurers (but not insurance brokers), public-sector bodies, and state-funded primary and secondary schools. A business that is already claiming under the Coronavirus Business Interruption Loan Scheme, or Coronavirus Large Business Interruption Loan Scheme, or COVID-19 Corporate Financing Facility is not eligible. 

What does the aid consist of?

The scheme helps SMEs to borrow between £2,000 and up to 25% of their turnover, subject to a maximum loan of £50,000. The UK Government will guarantee 100% of the loan and there will be no fees or interest to pay for the first 12 months. No repayments will be due during the first 12 months and after 12 months the interest rate will be 2.5% a year. The length of the loan is 6 years but early repayments can be made without incurring fees. 

Where to apply for the aid?

There are 11 lenders participating in the scheme including many of the main retail banks. Eligible businesses should apply directly via the participating lender’s website. If one lender turns an applicant down, applicants can apply to other lenders in the scheme.   

Is a notification to the EU Commission necessary?

The scheme falls under the UK’s £50 billion ‘umbrella’ scheme cleared by Commission on 6 April 2020 under the amended Temporary Framework. However, if the applicant was an “undertaking in difficulty” as of 31 December 2020, the scheme will fall under its De Minimis state aid allowance.  

Further remarks

Further details about the scheme are available here.


Coronavirus Statutory Sick Pay Rebate Scheme 

Who is eligible for the aid?

UK-based businesses with fewer than 250 employees as of 28 February 2020 and which had a PAYE payroll scheme which was created or started on or before 28 February 2020.

What does the aid consist of?

The scheme will repay employers the Statutory Sick Pay (SSP) paid to current or former employees for sickness absence due to COVID-19. The refund will cover up to 2 weeks’ SSP per eligible employee who has been off work because of COVID-19, starting from the first qualifying day of sickness. The scheme covers all types of employment contracts, including full-time employees, part-time employees, employees on agency contracts, employees on flexible or zero-hour contracts and fixed term contracts. 

Where to apply for the aid?

Rebate claims for SSP should be made using the Government‘s online service. Employers who are unable to claim online should have received a letter on an alternative way to claim. Employers should contact HMRC if they have not received a letter and are unable to make any eligible claims online.

Is a notification to the EU Commission necessary?

No. The scheme falls under the UK’s £50 billion ‘umbrella’ scheme cleared by Commission on 6 April 2020 under the amended Temporary Framework and claims should not exceed the undertaking’s state aid limit for aid received under any measures pursuant to the Temporary Framework (€800,000).  

Further remarks

The scheme is currently ongoing. Employers can claim back from both the Coronavirus Job Retention Scheme and the Coronavirus Statutory Sick Pay Rebate Scheme for the same employee but not for the same period of time. 


Discretionary Grants Fund Scheme 

Who is eligible for the aid?

Small and micro businesses based in England: 

  • with relatively high fixed property-related costs;
  • that are not eligible for the Small Business Grant Fund or the Retail, Hospitality and Leisure Grant Fund;
  • that occupy property (or part of a property) with a rateable value or annual mortgage/rent payments below £51,000; 
  • that have been trading on 11 March 2020; and 
  • that can show that their business has suffered a significant fall in income due to COVID-19. 

What does the aid consist of?

A discretionary grant of £25,000, £10,000 or any amount under £10,000. The grant does not need to be paid back but it will be taxable. Only businesses which make an overall profit once grant income is included will be subject to tax.

Where to apply for the aid?

Applicants should visit their local council’s website to find out how to apply. Local councils will run an application process and decide whether to offer a grant. 

Is a notification to the EU Commission necessary?

Payments of £10,000 or less under the Discretionary Grants Fund count towards the total De Minimis aid permitted (€200,000 limit over 3 years). If the applicant has reached its De Minimis threshold, it may still be eligible for funding under the UK’s £50 billion ‘umbrella’ scheme cleared by Commission on 6 April 2020 under the amended Temporary Framework.  

Payments of £25,000 are to be made under the UK’s £50 billion ‘umbrella’ scheme cleared by Commission on 6 April 2020 under the amended Temporary Framework (limited to €800,000). 

Further remarks

Applicants cannot apply if they are already claiming under another UK Government grant scheme, such as the Small Business Grant Fund or Retail Hospitality and Leisure Grant. Businesses that apply for the Discretionary Grants Fund Scheme can still apply for COVID-19 related loans if they are eligible. 

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