State Aid De Minimis Regulation and Business Rate Discounts
When awarding the business rate discounts within the enterprise zones, the Council must administer this within the State Aid De Minimis levels.
This is because this kind of discount is classed as ‘state aid’ and is subject to guidelines and an agreed upper limit.
What are State Aid Rules?
The State Aid rules regulate public sector intervention, with the aim of ensuring fair competition and the proper functioning of the single market.
Giving unregulated financial support to some businesses would:
- Risk distorting competition within the European common market
- Hinder the long-term competitiveness of the European Union.
This means that a business can only receive government support up to a maximum level. Because of this we have to ask any business that applies for a discount, detailed questions about financial support they may have received.
What are State Aid De Minimis levels and what are the rules for businesses?
For most organisations, the total amount of state aid that can be paid currently will be equivalent to €200,000 within a three year period. This is the equivalent of approximately £55,000 of state aid per year.
The ceiling for De Minimis aid for undertakings involved in road transport is €100,000.
Are there any exclusions to receiving State Aid De Minimis?
The following areas are excluded from receiving State Aid De Minimis
- Enterprises in road haulage operations for the acquisition of road freight transport vehicles.
- Enterprises in the agriculture sector (with the exception of those active in processing and marketing of agricultural products).
- Enterprises active in the coal sector; those undertakings in difficulty; or for directly export-related activities.
- The same costs that are being supported under another block exemption or notified scheme. It is unlawful to provide De Minimis for costs being funded under the State Aid cover of an exemption or notified scheme, if it means the specific allowable aid intensity will be exceeded.
- For the setting up of distribution networks, export aid or provided to businesses which are in difficulty.
What is classed as a business 'in difficulty'?
This is defined in section 2.1 of the Community Guidelines and State Aid for Rescuing and Restructuring Firms in Difficulty (2004/C22/02).
What counts as State Aid?
- state grants;
- interest rate relief;
- tax relief;
- tax credits;
- state guarantees or holdings;
- state provision of goods or services on preferential terms;
- direct subsidies;
- tax exemptions;
- preferential interest rates;
- guarantees of loans on especially favourable terms;
- acquisition of land or buildings either gratuitously or on favourable terms;
- provision of goods and services on preferential terms;
- indemnities against operating losses;
- reimbursement of costs in the event of success;
- state guarantees, whether direct or indirect, to credit operations preferential re-discount rates;
- discount rates;
- dividend guarantees;
- preferential public ordering;
- reduction of, or exemption from, charges or taxes, including accelerated depreciation and the reduction of social contributions;
- deferred collection of fiscal or social contributions;
- assistance financed by special levies;
- capital transfers;
- certain state holdings in the capital of undertakings
- business rates hardship relief payments;
- high street support payments.
What has this got to do with the Council?
Because the Council is the administrator of the Science Vale Oxford and Didcot Growth Accelerator enterprise zone business rates discount scheme, the Council is responsible for ensuring that any discounts comply with the regulations.
What does this mean and what does the Council have to do?
The Council will have to comply with the requirements for granting State Aid De Minimis. This means that we will have to ensure compliance with the strict guidelines as defined by the regulations. We do this by collecting detailed information and a formal declaration as part of the claim process before any discount is awarded.
The Council also has to inform businesses that the aid has been granted and keep records of aid given for at least ten years.
What is the process and who does what?
The application specifies that the business may be entitled to receive State Aid De Minimis and makes express reference to the De Minimis Regulation.
The application will ask for information on other awards of aid provided under the State Aid De Minimis received in the current and two previous fiscal years.
The Council also requires a declaration from the business that receiving the aid will not lead to them exceeding their State Aid De Minimis threshold.
The onus is on the business to demonstrate that they can receive the discretionary business rate discount within the State Aid De Minimis. Usually where State Aid De Minimis has been provided, the business will have been informed by letter that the support has been provided under the regulation.
The Council will not grant a discount to a business until it is satisfied that the €200,000 threshold will not be exceeded and the declaration is received.
What if some State Aid has already been granted?
If some State Aid has been received by the business in previous years but this does not exceed the De Minimis limit, then a partial business rate discount may be granted up to the De Minimis threshold level. If details are provided, the Council will work out the award.
How does the De Minimis threshold apply to aid received by a parent company / group of businesses rather than just a subsidiary?
The De Minimis threshold applies to the entire business enterprise.
If an organisation has received State Aid under an alternative State Aid exemption or notification, does this need to be listed in the De Minimis declaration?
No. Only aid provided under the De Minimis Regulations in the current fiscal year and the two previous fiscal years needs to be declared.
Is the provision of De Minimis aid (as in the case of the business rate discount) affected by the Enterprise Zone being in an assisted area or not?
No. The assumption with De Minimis aid is that, as long as it is given in compliance with the regulation, it is at such a level that it will not distort the market.
Who will be liable for any state aid 'problems'?
If illegal state aid was provided through the business rate discount then – as the body administering that element of the package – the Council would be responsible for recovering the money from the business that received it (with compound interest).
What conversion rate is used to calculate the discount?
The Commission’s reference exchange rate is used, as it is or was on the day that the Aid is granted. The reference rates can be found on the European Commission website.
What is the interaction between business rate discounts in enterprise zones and other discretionary reliefs?
Any other discretionary relief provided to the undertaking company must be taken into account in applying the De Minimis levels.
Where can I get further information on this?
Further information on State Aid and compliance can be found on the Department for Business, Energy & Industrial Strategy website.