How to give "Minimal Financial Assistance"

While much of the language in the Subsidy Control Act is new, many of the concepts are the same as what public authorities were used to under the state aid regime. If you flick open your EU-UK translation dictionary, and turn to “de minimis” you will find the slightly clunky-sounding “minimal financial assistance”, or “MFA”.

The rules around MFA are set out in Chapter 2 of Part 3 of the new Act. As with other areas, the rules here are very similar to those in the UK-EU Trade and Cooperation Agreement (“TCA”), so public authorities will have some familiarity already. However the devil, as they say, is in the detail. In this blog we’ll look at the level of MFA that an enterprise can receive, the limiting factors as to when MFA can be given, and the new letter-writing process that public authorities and enterprises will have to follow.

Under state aid law, one undertaking could receive €200,000 (around £177,000 at time of writing) de minimis aid over three financial years. Under the TCA, this effectively went up to 325,000 special drawing rights (around £359,000 at time of writing) as the subsidy control provisions do not apply below that level. When the Subsidy Control Act comes into force, the maximum MFA will reduce to £315,000 to one enterprise over three financial years.

It should be noted that the 325,000 special drawing rights limit under the TCA still applies – the TCA is not being replaced by the Subsidy Control Act, but implemented. While this is currently comfortably higher than the MFA level, we have all seen recently how much currencies can fluctuate – and so public authorities who utilise MFA may want to keep one eye on the value of 325,000 special drawing rights.

As before, this limit applies not to the public authority but to the recipient – those utilising MFA are therefore required to obtain confirmation that the enterprise has not received over £315,000 in the relevant three-year period. More on this confirmation process below.

Under the TCA, none of the provisions of the agreement apply to subsidies below the 325,000 special drawing rights threshold. Per S36(1) of the Subsidy Control Act, the “subsidy control requirements” do not apply to MFA. This is not the same. While the TCA included a blanket disapplication, the new Act only exempts MFA from certain requirements. Public authorities must avoid complacency, or thinking that no rules apply, when awarding MFA.

MFA does not need to be assessed against the subsidy control principles, and public authorities do not need to consider other prohibitions and requirements such as whether it is a rescuing or restructuring subsidy.

However, some rules do still apply. S36(6) makes clear that sections 16 and 17 remain in relation to subsidies given as MFA. This means that public authorities cannot give export performance subsidies or domestic content subsidies at any level, even if they are MFA – which is in keeping with the UK’s obligations under the WTO Agreement on Subsidies and Countervailing Measures.

The other set of rules which can apply to MFA are the transparency obligations found in sections 32 to 34 of the Act. S36(4) states that these apply to subsidies of over £100,000 whether they are MFA or not. This means that the public authority will have to upload details of such subsidies to the CMA’s Subsidy Database.

The details the public authority need to provide in cases of MFA are:

• The name of the public authority
• The name of the enterprise to which the subsidy is given
• The company registration number, VAT number, or charity registration number.
• The date the public authority confirmed the decision to give the subsidy or make the scheme
• The amount of the subsidy
• Statements where particular prohibitions or considerations apply (as set out in the Regulations).

One new feature of the subsidy control regime is the procedural requirements relating to MFA found in S37. This section details three written notices which must be given in relation to each award of a subsidy as MFA. Most public authorities will have been following a similar process to this already, but should now be careful to follow the detail of the new statutory requirements, not relying on existing practice.

The Act requires that all of these statements are “written” but does not specify a means of delivery. More informal means, such as an email, would therefore be compliant with the legislation – although authorities should keep careful records of these communications and may want to consider the most appropriate format to do that.

S37(1) – MFA Notification

The first correspondence required is an MFA notification. This is a notice sent from the public authority to the recipient enterprise. This notification must:

• explain that the subsidy is being given as MFA;
• specify the amount of the assistance (whether gross cash amount or gross cash equivalent); and
• request confirmation from the enterprise that receipt of the assistance will not put them over the threshold of £315,000 of MFA received in the current and the two previous financial years.

S37(2)(c) – Written Confirmation

The enterprise must then provide to the authority written confirmation that “the total amount specified in section 36(1) will not be exceeded by the enterprise receiving the proposed assistance”. The MFA may only be awarded after this confirmation is received.

S37(4) – MFA Confirmation

After the award has been made, the authority must then issue an MFA confirmation. This is to contain the same information as the MFA notification but, instead of requesting a written confirmation, must contain the date on which the assistance was given.

S37(4) states that this MFA confirmation must be provided by the authority “on giving the assistance”. There is no explicit time limit for this, but this wording implies that the two events are contemporaneous. We would recommend issuing the confirmation on the same day where possible.

The enterprise must then keep a written record of the information contained in the MFA Confirmation from the date noted as the date on which the assistance was given. Although S37(6) doesn’t require that the enterprise keeps the MFA Confirmation itself, we would recommend that at least a copy is kept as a suitable record.

If you have any questions about MFA, or the Subsidy Control Act more generally, we would be delighted to hear from you.