Subsidies

Overview – why is subsidy control relevant in the Growth Guarantee Scheme?

Facilities provided through the Growth Guarantee Scheme (GGS) 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 GGS 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 , GGS 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, GGS 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 (although, depending on the location and type of business, there are some differences in how the three-year period is calculated, as noted below). For GGS this is defined as the borrower or, where applicable, the borrower’s group. If you have questions about what constitutes a “group” for GGS purposes, your lender may be able to help.

You can also refer to the GGS FAQs here.

If a borrower or its group has received certain other relevant subsidies it will affect the maximum they can access through GGS, 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 Growth Guarantee Scheme?

Determining whether your business is in scope of the Northern Ireland Protocol ^{Read footnote text 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.

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 GGS  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 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 “three-year period” is calculated as the current fiscal year and the two preceding fiscal years.
• For businesses in scope of the Northern Ireland Protocol that are carrying out a business in the primary production of agricultural products or the primary production of fishery and aquaculture products, the “ three-year period” is calculated as the current fiscal year of the business or its group,  and its two preceding fiscal years. For businesses in scope of the Northern Ireland Protocol that are not carrying out a business in the primary production of agricultural products or the primary production of fishery and aquaculture products, the “three-year period” is calculated as the three year period prior to the offer date of the GGS facility.

Other relevant subsidies granted in the applicable 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 GGS. 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 GGS . Only relevant subsides provided within the applicable rolling three-year period will be relevant.

* 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 GGS 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, or after then by virtue of the NI Protocol; 
• 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 GGS .  

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 GGS . 

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 GGS 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 years is set out below (although see above for how to calculate the three-year period, dependent on business type). 

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.

Application to the previous phases of RLS 

The first three iterations of RLS ran from 6 April 2021 until June 2024. The changes to the scheme do not apply to existing facilities offered between these dates.

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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.