Overview of the Subsidy Control Act
The Subsidy Control Act (the Act) governs the provision of financial support by public authorities in the UK. Under the Act, procedures must be followed for most subsidy awards. However, minimal financial assistance (MFA) allows subsidies to be granted with fewer formalities. This insight provides an overview of what MFA is, when it applies, and the associated requirements.
What is MFA?
MFA refers to low-value subsidies that public authorities in the UK can provide without the need to comply with the full requirements of the subsidy control regime. MFA is intended to streamline the process for granting small subsidies which are unlikely to have a distortive impact on competition and trade.
When will MFA apply?
MFA is limited by a financial threshold that cannot be exceeded by a recipient. This threshold is cumulative, meaning that separate awards must be aggregated to calculate whether a recipient has exceeded it. The threshold is set at £315,000 and includes income received via other subsidies such as:
- separate MFA awards;
- Services of Public Economic Interest (SPEI) subsidies; and
- aid given by virtue of the Windsor Framework.
This means that a single entity can receive small cumulative subsidies up to the threshold without triggering the need for a more extensive assessment under the subsidy control rules.
Section 36(2) of the Act clarifies that the relevant period for calculating whether the threshold has been exceeded is three years, made up of:
- the elapsed part of the current financial year, and
- the two financial years immediately preceding the current financial year.
If the MFA is provided in cash, then the gross cash amount can be used to determine the amount provided. If the MFA is provided in an alternative form, then the amount is to be determined by the gross cash equivalent of the assistance.
Notwithstanding the financial threshold, MFA is not available in every circumstance. For example, section 36(6) of the Act clarifies that MFA cannot be provided for subsidies which are prohibited, being subsidies favouring domestic goods or subsidies contingent upon export performance. These circumstances are unlikely to arise, but would for example include a scenario where a public authority gave a subsidy conditional upon the recipient buying British-made cars. This would be an unlawful subsidy under the Act and therefore MFA would not apply.
Notification requirements
Although subsidies provided under MFA are not subject to the full subsidy control requirements, there are still certain procedural requirements which must be complied with:
- Prior to providing the MFA, public authorities must provide the recipient with an "MFA notification". This notification should be a written statement which specifies the gross value amount of the assistance. The notification will also request written confirmation from the recipient to confirm that the financial threshold will not be exceeded due to the MFA received.
- The public authority must not provide the MFA until the recipient's confirmation is received and may wish to carry out its own due diligence in addition.
- When awarding an MFA subsidy, the public authority must give the recipient an "MFA confirmation", setting out:
- that the subsidy is given as MFA;
- the date on which it is given; and
- the gross value amount of the assistance.
- The recipient must keep a written record of the amount provided, including the date it is provided and the gross value of the amount. The record must be kept for at least three years from the date the MFA was provided.
In addition to the procedural requirements, the Act imposes transparency requirements for public authorities to include information about any MFA provided in excess of £100,000 on the subsidy control database.
Other considerations
Despite the simplified process, public authorities must still ensure that any subsidies granted under MFA meet the general principles set out in the subsidy control regime. This includes ensuring that the subsidy is necessary, proportionate, and limited to what is required to achieve the desired policy objective.
Moreover, public authorities should consider whether the cumulative impact of MFA, along with other subsidies, could lead to a distortion of competition or have a significant impact on trade within the UK.
Conclusion – balancing flexibility and compliance
MFA represents a pragmatic approach to subsidy control, allowing public authorities to grant small-scale subsidies without the need for extensive regulatory compliance. While MFA provides flexibility and reduces administrative burdens, it also requires
