Business grant subsidy allowance (previously referred to as state aid)
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.
On 4 March 2021 new subsidy allowances were established for the coronavirus (COVID-19) business grant schemes. From this date, we must apply the updated scheme rules.
The rules do not apply retrospectively. This means, if we rejected an application before 4 March 2021 on the grounds the business had reached previous state aid limits, the application must not be revisited. Businesses may submit a new application if still within a current payment cycle.
You can only get grant funding if you do not exceed the permitted subsidy allowance and you are not an 'undertaking in difficulty'.
This scheme is covered by 3 subsidy allowances:
- Small Amounts of Financial Assistance Allowance: you’re allowed up to £335,000 (subject to exchange rates) over any period of 3 years
- COVID-19 Business Grant Allowance: you’re allowed up to £1,600,000
- COVID-19 Business Grant Special Allowance: if you have reached your limits under the Small Amounts of Financial Assistance Allowance and COVID-19 Business Grant Allowance, you may be able to access a further allowance of funding under these scheme rules of up to £9,000,000, provided certain conditions are met.
Grants under these 3 allowances can be combined for a potential total allowance of up to £10,935,000 (subject to exchange rates).
Small Amounts of Financial Assistance Allowance (SMFAA)
This allowance is the equivalent of £335,000, to a single economic actor over any period of 3 fiscal years. It includes any subsidy previously received as de minimis aid or as Small Amounts of Financial Assistance Allowance under Article 3.2(4) of the Trade and Cooperation Agreement from any subsidy awarding body.
COVID-19 Business Grant Allowance
If limits are reached under the Small Amounts of Financial Assistance Allowance, the COVID-19 Business Grant Allowance enables a further £1,600,000 to be paid to a 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 Commission’s Temporary Framework across any other UK scheme.
COVID-19 Business Grant Special Allowance (C19BGSA)
If limits are reached under the Small Amounts of Financial Assistance Allowance and COVID-19 Business Grant Allowance, you may be able to access a further allowance of funding of up to £9,000,000 per single economic actor if a series of further conditions are met.
In total, an economic actor could combine the allowances and potentially receive a total allowance of £10,935,000 from these business grants schemes. This is subject to the precise applicable amount calculation for the Small Amounts of Financial Assistance Allowance.
COVID-19 Business Grant Special Allowance conditions
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 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 the date of application, 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 annual balance sheet), where the grant payment must not exceed 90% of the uncovered fixed costs
- grant payments under this allowance must not exceed £9,000,000 per single economic actor. 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 must not be added up with other subsidies for the same costs.
Undertaking in difficulty
‘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 a small or medium-sized enterprise (SME) that has been in existence for less than 3 years, where more than half of its subscribed share capital has disappeared because of accumulated losses. This is the case when deduction of accumulated losses from reserves (and all other elements 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 3 years, where more than half of its capital as shown in the company accounts has disappeared because 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 2 years: (1) the undertaking's book debt to equity ratio has been greater than 7.5 and (2) the undertaking's EBITDA (earnings before interest, tax, depreciation and amortization) interest coverage ratio has been below 1.0.
Businesses must be able to provide the necessary documentation to demonstrate eligibility for funding under C19BGSA.
Grants provided more than the SMFAA will not be granted to applicants that were defined as an ‘undertaking in difficulty’ on 31 December 2019. The ‘undertaking in difficulty’ does not apply to small and micro companies (less than 50 employees and less than £9 million turnover) providing the business is not subjective to collective insolvency proceedings.
Find out more about subsidy allowances on GOV.UK.