Subsidies

Overview – why is subsidy control relevant in the Recovery Loan Scheme?

Facilities provided through the Recovery Loan Scheme (RLS) are subsidies. This is because these facilities are supported by the government, and they give an advantage to the business that receives them. While the business remains liable to repay 100 per cent of the RLS facility provided by a lender, the facilities are backed by a government guarantee which enables the lender to provide the facility to the business.

Subsidies come in different forms, and the giving of subsidies is governed by UK law. However, if a business is in scope of the Northern Ireland Protocol, European regulations will be relevant.

If a business is not in scope of the Northern Ireland Protocol , RLS facilities are considered to be a subsidy in the form of Minimal Financial Assistance under the UK’s Subsidy Control Act.

If a business is in scope of the Northern Ireland Protocol, RLS facilities are subject to the European Commission’s de minimis Regulations. These set thresholds for subsidies (called “State aid” under these rules) that can be provided to businesses.

In both instances, there is a maximum amount of subsidy that can be paid to an entity or group of entities engaged in economic activity over a period of three fiscal years. For RLS this is defined as the borrower or, where applicable, the borrower’s group. If you have questions about what constitutes a “group” for RLS purposes, your lender may be able to help. You can also refer to the RLS FAQs on the BBB website.

If a borrower or its group has received certain other relevant subsidies it will affect the maximum they can access through RLS, potentially reducing it to zero (see: What is the maximum amount of subsidy that businesses are entitled to?). Note that the amount of subsidy is not the same as the total amount being borrowed under an RLS facility.

What does it mean for borrowers under the Recovery Loan Scheme?

Determining whether your business is in scope of the Northern Ireland Protocol ¹

As part of the application process, businesses will be asked two short questions relating to the business’s links to Northern Ireland, which will assess whether or not the business is in scope of the Northern Ireland Protocol

If a business is identified as potentially being in scope of the Northern Ireland Protocol, lenders may ask the business further questions to determine whether there are any additional factors which would mean the business could in fact be out of scope. These are standardised questions which are prescribed by the British Business Bank.

Confirming that your business isn’t receiving more subsidy than it is entitled to

All businesses will be informed by their lender that they will be receiving a subsidy as part of any potential new RLS facility. As mentioned above, for businesses not in scope of the Northern Ireland Protocol this will be Minimal Financial Assistance under the UK’s Subsidy Control Act. For businesses in scope of the Northern Ireland Protocol, this will be a subsidy under the EU State aid de minimis Regulations.

It is important to note that the amount of the subsidy and the amount the business is proposing to borrow are different. Lenders will inform businesses of this value. 

Lenders will ask businesses to provide written confirmation that receipt of the facility will not mean that their business receives an amount of subsidy that exceeds the relevant subsidy thresholds in a rolling three-year period (see: What is the maximum amount of subsidy that businesses are entitled to?). There are slight differences in how this three-year period is determined for businesses in scope of the Northern Ireland Protocol and those not in scope:

• For businesses not in scope of the Northern Ireland Protocol, a “fiscal year” is the period running from 1 April in one year to 31 March in the following year. The “rolling three-year period” is calculated as the time elapsed in the fiscal year the offer date of the RLS facility falls in (commencing on 1 April), plus the previous two fiscal years preceding that year each ending on 31 March.
• For businesses in scope of the Northern Ireland Protocol, a “fiscal year” is the financial year of the business or its group. The “rolling three-year period” is calculated as the time elapsed in the financial year of the business that the offer date of the RLS facility falls in, plus its previous two financial years.

Other relevant subsidies granted in the applicable rolling three-year period count against a business’s entitlement. Businesses must tell the lender the amount of any relevant subsidies that they have received during that three-year period. 

It is the responsibility of the business to declare any relevant subsidies that could reduce the maximum facility amount they could access through RLS. Recipients of relevant subsidies should have been issued with documentation at the time confirming the value of the subsidy (note: some subsidies may have been described as “State aid” in documentation received by the business). If the business is in any doubt, they should contact the organisation that provided the support in question for confirmation.

What are other relevant subsidies that need to be taken into account?

Below is a non-exhaustive list of common financial support for businesses that may constitute a subsidy, showing whether these subsidies should be included when calculating the maximum subsidy that could be provided through RLS. Only relevant subsides provided within the applicable rolling three-year period will be relevant.

Category	Relevant for RLS subsidy control calculations	Not relevant for RLS subsidy control calculations
Business Finance	Bounce Back Loan Scheme (in certain limited circumstances where you will have been notified by your BBLS lender that the facility was provided under the EU’s de minimis Regulations and the value of the subsidy received) * Enterprise Finance Guarantee Northern Powerhouse Investment Fund finance Midlands Engine Investment Fund finance Cornwall and Isles of Scilly Investment Fund finance Start Up Loans	Recovery Loan Scheme facilities offered from 6 April 2021 to 30 June 2022 (even if drawn later) Coronavirus Business Interruption Loan Scheme Coronavirus Large Business Interruption Loan Scheme Covid-19 Wales Business Loan Scheme Facilities supported by UK Export Finance
Grants	Local Authority grants, including grants paid during the pandemic that were not issued under a Temporary Framework	Grants issued under a Temporary Framework or General Block Exemption Rule (your paperwork should clarify this). These include, but are not limited to, the following grants issued under the Covid-19 Temporary Framework: Coronavirus Job Retention Scheme Retail, Hospitality and Leisure Grant Scheme (England) Statutory Sick Pay Rebate Local Authority Discretionary Grant Fund Innovate UK COVID-19 continuity loans Coronavirus Community Support Fund Self-Employment Income Support Scheme Retail and Hospitality Scheme (Northern Ireland) SME Housebuilders Liquidity Fund (Scotland) Creative, Tourism & Hospitality Enterprises Hardship Fund (Scotland)
Other business support	Business rates relief

* If your business took out a Bounce Back Loan and you indicated your business was a “business in difficulty” when applying for the Bounce Back Loan Scheme, it will count towards your cumulative aid allowance when calculating the maximum amount you can access. Your lender will have provided a written statement stating the value of the subsidy (note: for Bounce Back Loans this is the full principal amount of the loan plus the business interruption payment). 

As mentioned above, if you received a relevant subsidy previously you should have been issued with documentation outlining the value of the subsidy and the legal basis used to provide it. Checking whether this documentation refers to the following subsidy rules will allow you to ensure that you inform lenders of any relevant subsidies. It is your responsibility to ensure you declare all eligible subsidies as part of the RLS application process.

For businesses that are not in scope of the Northern Ireland Protocol you should look for: 

• de minimis aid granted before 31 December 2020, when the transition period for the UK exiting the EU ended; 
• small amounts of financial assistance (SAFA) granted under Article 364(4) or Article 365(3) of the Trade and Cooperation Agreement as incorporated into UK Law by the European Union (Future Relationships) Act 2020 in the period from 1 January 2021 to 4 January 2023 when the new UK Subsidy Control Act came into force; and
• Minimal Financial Assistance or SPEI Financial Assistance granted under the Subsidy Control Act.

for businesses that are in scope of the Northern Ireland Protocol you should look for:

• de minimis aid granted under EU State Aid. 

in each case provided to the business or, if the business is part of a “Group”, the business and its Group, during the previous applicable rolling three-year period.

Note: there is a chance that some paperwork granting SAFA to borrowers not in scope of the NI Protocol may refer to de minimis (for example, a Bounce Back Loan provided on or after 1 January 2021 if you indicated that your business was a “business in difficulty”). Either way, it should be taken into account when calculating the maximum amount that can be accessed through RLS.

Additional relevant subsidies for borrowers in scope of the Northern Ireland Protocol

Additionally, if a business is in scope of the Northern Ireland Protocol two other subsidies are relevant. Again, you will want to check any documentation previously received.

If a business has received aid for a risk finance measure under the General Block Exemption Regulation (GBER) or a European Commission decision totalling more than €14.8 million, there is a limit in terms of how much additional de minimis aid a business can be granted in relation to the same measure. If a business has received more than €14.8 million of risk finance aid to date, it will not be eligible for aid under RLS.  

Examples of relevant risk finance schemes in the UK include the Enterprise Investment Scheme (EIS), Venture Capital Trusts (VCT), Seed Enterprise Investment Scheme (SEIS) and Social Investment Tax Relief (SITR).

Finally, if a business has received aid for the same eligible costs under GBER or a European Commission decision, there is also a limit in terms of how much additional de minimis aid a business can be granted. If a business is applying for a loan for the exact same purpose (for example to fund a specific piece of equipment) in respect of which they have already received aid, it will also not be eligible for aid under RLS. 

What is the maximum amount of subsidy that businesses are entitled to?

For businesses outside of the scope of the Northern Ireland Protocol, the maximum subsidy amount that can be paid to a borrower or its Group over a period of three fiscal years through RLS is £315,000. 

For businesses in scope of the Northern Ireland Protocol, the maximum subsidy amount that can be paid to a borrower or its Group as de minimis State aid over a period of three fiscal years is set out below. 

Sector (in scope of the NI Protocol)	Maximum Permissible Aid (£)	Maximum Permissible Aid (€)
All sectors other than those in the rows below	170,000	200,000
Road Freight Transport	85,000	100,000
Fishery and aquaculture	25,500	30,500
Primary production of agricultural products	17,000	20,000

It is important to note that the amount of the subsidy and the amount the business is proposing to borrow are different. Lenders will inform businesses of this value.

The Subsidy Control Act 2022

Subsidies to businesses outside the scope of the Northern Ireland Protocol are granted under the Subsidy Control Act and are Minimal Financial Assistance (“MFA”) subsidy under that Act. The statutory guidance on the Subsidy Control Act for consultation is available at: UK subsidy control statutory guidance - GOV.UK (www.gov.uk).

Application to the previous phases of RLS

The first two iterations of RLS ran from 6 April 2021 until 30 June 2022. The changes to the scheme do not apply to existing facilities offered between these dates. As above, facilities provided through the first two iterations of RLS do not affect the maximum subsidy that could be provided through the current iteration of RLS.

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  The Northern Ireland Protocol has now been amended by the Windsor Framework, a legal agreement which changes how the Northern Ireland Protocol operates. References to the “Northern Ireland Protocol” throughout these pages should be understood accordingly. For more details on this, please see https://www.gov.uk/government/publications/the-windsor-framework.