News & Insights

COVID-19 Assistance and State Aid Rules

Partner, Bill Dixon, looks at the implications of state aid rules on assistance measures during the pandemic.

The past 12 months or so has seen an extraordinary range of assistance to businesses from both national and local government. Some concerns have been raised, however, as to whether larger businesses or those generally receiving the larger amounts of support might fall foul of state aid rules and be required to make a partial repayment at some point in the future.

In practice hopefully this is unlikely to be a problem.

EU law applies to the period down to the end of December 2020. EU rules prohibit state aid which distorts competition or trade between states within the EU. However:

  1. There has always been a de minimis exception in respect of aid to an undertaking of €200,000 or less over a 3- year rolling period. In practice it will now be relevant to look at the 3-year period down to December 2020 when EU law applied.
  2. Early in the crisis, in March 2020, the EU introduced a number of further measures via the Temporary Framework for State Aid including allowing direct grants of up to €800,000.
  3. Many of the support measures introduced in the UK are not likely to be seen as state aid at all including the job retention scheme, deferral of tax and VAT and suspension of local authority rates.

From the beginning of January 2021, the UK will be setting its own rules on state aid. Full details are still being worked out (and in any event the UK will still be required to comply with WTO and other measures in respect of state aid). It appears however that there will be an exception in respect of emergencies and that the previous de minimis limits are also likely to be raised in any event. For the time being, the UK’s rules on state aid granted on or after 1 January 2021 will be governed by the provisions of the Trade and Cooperation Agreement, which broadly resemble the EU’s rules.

Anyone concerned that they might conceivably have exceeded the various limits should undertake a careful analysis of the position by reference to the particular categories of support and the principles set out above.