State aid

What it means

State aid is any advantage that the state or another public body grants from public resources to selected undertakings and that may distort competition and trade between EU member states. It may take the form of a grant, tax relief, a subsidised loan, a guarantee or a sale of assets below market price.

EU rules prohibit state aid in principle but allow many exceptions. The most common are small amounts of de minimis aid, aid under the General Block Exemption Regulation, for example for investment, research or training, and schemes approved by the European Commission.

For companies it matters that aid is monitored and recorded. When applying for support, a company must state what aid it has already received, and the granting authority checks that limits are not exceeded. The rules are notably more favourable to SMEs.

How it works in practice

Before applying for a grant from EU funds or the Recovery Plan we establish with the client under which state aid regime the call operates. That determines the maximum aid intensity, eligible costs and whether the aid counts towards the de minimis limit.

Some tax instruments, such as the super-deduction for research and development or investment incentives, may also be state aid. When they are used we keep track of the related conditions, including publication and records.

We keep an ongoing record of aid received on the client’s behalf so that they can quickly evidence it in the next application. For a group of linked companies we track aid for the whole single undertaking, not just an individual company.

What to watch out for

Aid granted in breach of the rules must be repaid with interest, even years later. The risk lies with the recipient, not the grantor, so we read aid conditions carefully and comply with them throughout the project’s durability period.

An undertaking in difficulty, for example one whose losses have reduced equity below a statutory level, is often not eligible for most aid. Before applying we therefore check the financial indicators from the latest financial statements.