In addition to the maximum grant levels set out for Rural Priorities options, the amount of grant payable for certain activities, mainly under Axis three, can also be limited because of rules applied by the European Commission in relation to State Aid.
Eligible projects most likely to be affected are those with non-agricultural, non-forestry, commercial activities. The guidance below explains this in more detail and aims to help you understand State Aid.
What is State Aid?
State Aid is a term for financial support that a publicly-funded body or public body grants towards funding a project. This effectively means that all public funding is State Aid in one form or another.
Some bodies may be obvious to you as a falling into the above categories while others may be less obvious. For example, the Big Lottery Fund is categorised as State Aid.
The definition of State Aid comes from the Treaty on the Functioning of the European Union (TFEU), where Article 87(1) provides that:
“Any aid granted by a Member State or through state resources in any form whatsoever that distorts or threatens to distort competition by favouring certain undertakings or the production of goods or services shall, in so far as it affects trade between Member States, be incompatible with the internal market”.
Aid given in contravention of the EC State Aid rules may result in legal proceedings by the EC and the recovery, with interest, of the payment from the recipient. As a result great care must be taken to ensure where State Aid is given, it is done so within the State Aid rules in force.
The Scottish Government is also required to abide by the specific rules contained within various references in the articles of the TFEU, frameworks, guidelines and regulations; such as the European Council Regulation No 1698/2005 (EC No 1698/2005).
Why is State Aid an issue?
The European Community is founded on free market principles so starts from the premise that State Aid is undesirable because it can distort a free market. However, the European Commission (EC) recognises the need for some exceptions to be made.
Why does State Aid only affect some projects?
Some types of activities are governed by specific State Aid regulations. Included in this are agriculture and forestry. Rural Priorities funding is set in line with these specific regulations. Therefore while the funding for agricultural and forestry projects is State Aid the funding limit for these types of projects generally cannot be breached through Rural Priorities funding.
What are the restrictions?
Projects not covered by the agriculture and forestry regulations will be assessed by the Case Officer to determine if restrictions need to be applied. Currently the maximum ceiling limit for "undertakings" where State Aid restrictions must be applied is €200,000 in a 3 fiscal year rolling period. This funding is referred to by the EC as de minimis. For projects affected by State Aid, where de minimis is less than the funding application, consideration will be given to alternative available State Aid cover. In such cases, the application will be considered under the General Block Exemption Regulations (GBER). The best available cover will be applied to the project to provide the maximum level of funding while minimising the risk of contravening EC rules.
What are "undertakings"
The term “undertaking” can include businesses, groups and individuals, therefore an applicant to Rural Priorities will be deemed an “undertaking”
What is a fiscal year?
The fiscal year in Scotland is the tax year. This means the 1st April in one year through to the 31st March of the following year.
What is "de minimis"?
de minimis is a Latin expression which roughly translated refers to minimal things. The level of funding set under State Aid rules for de minimis is €200,000. The EC considers de minimis funding to undertakings over 3 rolling fiscal years to have little impact on trade and competition. On this basis, State Aid de minimis enables public funding of up to €200,000 to be awarded to a single undertaking over 3 rolling fiscal years.
Does State Aid only affect projects which receive over €200,000 in grant?
No. Any undertaking paid using the de minimis regulation will be notified in writing. The undertaking must notify any public body of this funding if they apply for any public funding for any project within 3 fiscal years.
An undertaking cannot receive more than €200,000 of de minimis in any rolling three fiscal year period. Undertakings are legally obliged to declare all current de minimis when applying for public funding.
What is €200,000 in Pounds/Sterling?
The up to date exchange rate can be found on the EC website. The exchange rate used will be the current rate at the time your contract is issued.
Exclusions to de minimis
Funding paid using de minimis cannot be used for export related activities (except attendance at trade fairs), agriculture (covered under a separate regulation) or aid favouring domestic goods over imports.
What is the General Block Exemption Regulation (GBER)
GBER is a form of funding under State Aid prescribed in the Commission Regulation (EC) No 800/2008. This regulation sets out particular project categories that have been declared as compatible for State funding by the EC. Details of the requirements can be found in the regulation.
In short, the GBER is an alternative form of State Aid cover which allows the member state to ensure funding can be granted in a compatible manner, in accordance with the EC framework. In projects where the GBER is applied it is essential the project fully complies with the required conditions. This form of State Aid cover is used in limited situations for Rural Priorities, your case officer will advise you of any essential requirements.
Can my project benefit from de minimis and the GBER?
Rural Priorities funding awarded under the GBER cannot be used alongside de minimis as a “top-up”. In some cases, the GBER or de minimis can be awarded alongside other funding streams for example the National Lottery.
What about the €500,000 State Aid limit?
You may be aware that we utilised a temporary State Aid limit of €500,000 in part of 2009 and 2010. This increased limit was introduced in 2009 by the EC on a temporary basis and came to an end on 31 December 2010.
How to manage my project with State Aid
State Aid is recognised as a complex area for applicants and officials. Your case officer will carry out a State Aid assessment for your project where it is required. For some complex projects, your case officer may refer your application to our central office for additional opinion.
If your funding is to be paid as de minimis or through the GBER your case officer will notify you as soon as practical. If you disagree with the assessment, you should fully outline your reasons in writing to your case officer. We may refer your application to State Aid specialists for further advice and in extreme cases may need to refer your application to the EC for a decision. For the small number of projects where it is necessary to refer the application for specialist advice it will cause some delay.
As an undertaking you must declare to your case officer, in writing, if you have received any other de minimis State Aid funding within the last 3 calendar years. Similarly, we will inform you explicitly, as part of your contract, where you are being awarded funding through de minimis. The State Aid annex (Annex A of your contract) will include the value of the award in Euros.
For further information regarding State Aid, please contact your case officer in the first instance.