State Aid in the UK post Brexit – an end to the bureaucracy? - PKF Francis Clark
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State Aid in the UK post Brexit – an end to the bureaucracy?

Earlier this week (30 June 2021), the government announced that “The UK’s new bespoke subsidy system will be simple, nimble and based on common sense principles — free from excessive red tape,” with the Subsidy Control Bill being introduced to parliament later that same day.

Current EU rules

Whilst I would not describe myself as a State Aid expert, I do get questions on the topic due to my experience with various grant schemes (EU and UK) over the years. Most recently these categories included Business Support Grants and Coronavirus Business Loan Schemes.

I end up referring a lot of these questions to solicitors who have a greater level of expertise in State Aid matters. I have, on occasion, tried to get one to send me a simplified guide to State Aid, so that I can share this with colleagues. But suffice to say this guide has not been forthcoming – illustrating to me the complexities inherent in the current system.

So, I would always have been interested to read the headlines in connection with Subsidy Control Bill; more so, having been involved in the consultation process.

Headlines

The FT article is the best I have read on the new scheme and can be found at link (although you do need to be a subscriber). This gives useful background on the central issues concerning the legislation – which needs to balance:

  • UK government’s aim of taking back control and making decisions re allocation of government funds to businesses that differentiate UK from the EU
  • EU imperative of retaining a level playing field between UK and EU

The UK government’s answer to this dichotomy has been to “introduce a subsidy control system that will support businesses to grow and thrive in a way that suits UK interests and is consistent with a dynamic and competitive economy” featuring aspects reported as part of GOV.UK webpage, including:

  • providing a legal framework for public authorities to award subsidies in line with our subsidy control principles. There will be a statutory duty for public authorities to consider these principles and only award a subsidy if the subsidy is consistent with these principles
  • introducing a number of prohibitions to prevent public authorities granting subsidies with distortive or harmful economic impacts
  • provides a requirement for public authorities to use the transparency database, which will contribute to the effective management of the regime
  • establishes the Subsidy Advice Unit (located within the Competition and Markets Authority) to provide monitoring and oversight of the new regime.
  • enables interested parties to challenge subsidy decisions on judicial review grounds in the Competition Appeal Tribunal

Additionally, there are some concepts familiar to anyone who has been involved in grants previously which seem to have been retained, including:

  • Displacement – “The new system will prohibit the awarding of subsidies that will result in the relocation of jobs and economic activity from one part of the UK to another”
  • Undertaking in Difficulty (the phrase is not used but the principal appears to be..) – “banning unlimited government guarantees to businesses as well as subsidies granted to ‘ailing or insolvent’ enterprises where there is no credible restructuring plan”

However, they do also say “we are no longer bound by restrictive EU definitions which unfairly penalised start-ups and small businesses.”

Gov.uk site states that further details on implementation and guidance will be set out in due course. The regime will come into effect in 2022 subject to Parliamentary approval.

PKF Francis Clark

One area where our innovation tax team often assist clients is in understanding the State Aid rules around:

  • Interaction between grants for R&D and R&D Tax Credits
  • Interaction between grants and EIS/ SEIS.

Please do not hesitate to contact them, direct or via your usual PKF Francis Clark point of contact, with any queries you have on those areas.

As for me and the Subsidy Control Bill, I have noted this is 66 pages, my litmus test as to how ‘simple’ it is will be when I ask a friendly solicitor for an idiot’s guide to the legislation and whether one is forthcoming or not…

FEATURING: Richard Wadman
Richard qualified as a Chartered Accountant with KPMG in 1993. Since 2006 he has worked in Corporate Finance, firstly with the predecessor firm in Truro… read more
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