Subsidy control information

The Scottish Government's Community and Renewable Energy Scheme (CARES) has been registered with the BEIS, allowing grant and loan funding to be provided under the subsidy control scheme. 

On this page you will find out about: 

1. How to determine whether the funding is a subsidy 

2. De minimis funding

3. General Block Exemption regulations

 

1. Determining whether a subsidy is present

To determine whether the funding is considered a subsidy there are several tests to apply. 

The first two tests are about the organisation applying for funding: 

Part 1: There are two initial assumptions – please answer ‘Yes’ or ‘No’

1. Is the beneficiary an ‘economic actor’?

Taken from Article 3.1 of the Subsidy Control chapter[1] of the Trade and Cooperation Agreement (TCA), the term “economic actor” means an entity or a group of entities constituting a single economic entity, regardless of its legal status, that is engaged in an economic activity by offering goods or services on a market.  

 

Yes/ No

2. What is economic activity?

This is defined as essentially meaning offering goods and/or services on a given market and which could, at least in principle, be carried out by a private operator for remuneration in order to make profits.  Usually, the question of whether or not an intended recipient engages in economic activity is straightforward – but not always.  If you are in any doubt, you should seek advice before concluding that your proposed measure is not a subsidy.

 

Yes/ No

 If you answer ‘Yes’ to questions 1 and 2,  complete Part 2.

If  you answer ‘No’, the assessment is complete – Part 2 is not required. 

 [1] Part Two, Heading One, Title XI (Chapter 3)

 

If the answer is yes to questions 1 and 2 above, you then need to apply following four tests to your project. All four tests must be met for a subsidy to be present. 

Part 2: The Four Subsidy Control Tests – answer ‘Yes’ or ‘No’ and provide a comment to explain your answer.

 

Test 1

Will the measure arise from State resources (which can take a variety of forms, e.g. grants, interest and tax reliefs, loans, guarantees, government holdings of all or part of a company, or providing goods and services on preferential terms, etc)? 

  Yes

Provide an explanation to back up your answer to this test: 

Funding available through CARES comes directly from Scottish Government resources so this test is met.

Test 2

Will the measure confer an economic advantage on one or more economic actors?

 Yes

Provide an explanation to back up your answer to this test:

This test is met because the funding we award is selective in nature and alleviates the beneficiary of costs it would have to bear from its own resources. This provides the beneficiary with an economic advantage as a result of those costs being met by public funds.

Test 3

Is the measure specific insofar as it benefits, as a matter of law or fact, certain economic actors over others in relation to the production of certain goods or services? 

Yes/ No

Provide an explanation to back up your answer to this test:

 We do offer measures which benefits certain economic actors so this test is often met. With subsidy support from CARES, eligible applicants are able to generate their own power. This allows them to produce power and sell it to a market. In this case we expect that this test is met so at a scheme level the test is met.

Whilst the overall scheme meets this test there may be specific cases where this it could be shown that the test is not met. This would be looked at and assessed on a case by case basis. 

Test 4

Will the intervention have, or could it have, an effect on trade or investment between the UK and other countries?

Yes/ No

 

Provide an explanation to back up your answer to this test:

 In some cases CARES funding could have an effect on trade or investment.

Whilst CARES is relatively small scale there is a theoretical risk that providing a subsidy for installing renewable technologies and local energy systems will mean that it may make it more difficult for operators in the EU to enter the market by maintaining or increasing the local energy supply.

Whilst the overall scheme might meet this test there may be other cases where the intervention will not have an effect on trade or investment, this would be looked at and assessed on a case by case basis.

 

2. De minimis 

De minimis aid under EU law

Whilst the UK was part of the EU we were governed by the European Commission State aid rules and regulations.  It was considered that public funding to a single recipient of up to €200,000 over a three-year fiscal period had a negligible impact on trade and competition, and did not require notification. The aid could be given for most purposes, including operating aid, and was not project-related.

De minimis subsidies under the Trade and Cooperation Agreement (TCA)

Similar to the de minimis threshold that was available under EU law, Article 3.2.4 of the TCA exempts subsidies where the total amount granted to a single economic actor is below 325,000 Special Drawing Rights (SDR)[1] over any period of three fiscal years.  The SDR rate of 325,000 is static, however, the conversion rate for this to £ sterling can fluctuate on a daily basis and therefore just like its EU predecessor the conversion rate is that applicable on the date of the offer.

When you are awarded CARES funding under de-minimis you will be asked to complete a de-minimis declaration form from us. The declaration you will be sent will contain the amount of funding being given in £ sterling and the SDR value. You will also be required to account for any de- minimis aid received previously within the rolling 3 year fiscal period and to sign the declaration confirming this.

To calculate previous EU de-minimis funding you should use the SDR conversion rate available at 1 January 2021, unless it is possible to establish the rate at the time of payment in which case that rate should be used.  This will show that previous funding now converted into SDR’s had been taken into account before proceeding with the scope afforded under the new rules which have the potential to be more favourable to grantees.

[1] Special Drawing Rights are units of account, used by the International Monetary Fund.  SDRs are not a currency – their value is based on a basket of five currencies. A pound to SDR conversion tool can be accessed via the following link:- Right to Pound - SDR to GBP exchange rate - Special Drawing Right to British Pound Currency Converter (fx-rate.net)

3. General Block Exemption Regulations

Under the EU regulations CARES was able to offer funds through the General Block Exemption Regulations (GBERs) and we are registered for the continued use of GBER where funding will be offered under these same principles. A guidance note is available on this. It should be noted that as the consultation on subsidy control is still underway it is unclear at present what the successor to the GBER exemptions will be under the new subsidy control regime. 

If, in the Scottish Ministers’ opinion, the CARES Grant or loan funding offer (or any part or condition thereof) does not comply with applicable Subsidy Control obligations and they consider that they are required to recover the Grant or loan (or a part thereof) in order to ensure compliance with their legal obligations, Scottish Ministers may require immediate repayment of the Grant or loan (or any part of it) together with interest at such rate and on such basis as may be determined from time to time in accordance with law. Subsidy control: designing a new approach for the UK - GOV.UK