Subsidy Control Act 2022

Part 3: Exemptions

Chapter 1: Introductory

Section 35: Introductory

129. This section explains that this part of the Act sets out where certain subsidies and schemes are exempt from the requirements of the regime.

Chapter 2: Minimal and SPEI financial assistance

Section 36: Minimal financial assistance

130. Subsection (1) sets out the ‘minimal financial assistance’ exemption. Subsidies given through the exemption do not have to apply the subsidy control requirements if the total amount of ‘minimal or SPEI financial assistance’ received by the intended beneficiary does not exceed £315,000 over a three financial year period.
131. However, under subsection (4) the transparency requirements do apply to subsidies given as minimal financial assistance where the amount of subsidy is more than £100,000.
132. The definition of ‘minimal or SPEI financial assistance’ is set out at section 42(8). The three-year period is calculated as the two previous financial years and the elapsed part of the current financial year.
133. Public authorities giving a subsidy within this exemption must confirm they are doing so to the recipient of the subsidy.
134. For subsidies given as cash , it is the gross cash amount that determines the value of the subsidy. Where a subsidy is given within this exemption through another means, such as a loan, the value of the subsidy must be expressed as a gross cash equivalent. The methodology for determining the gross cash equivalence of a subsidy may be set out in regulations, as provided for in section 82.
135. Subsidies relating to goods awarded through this exemption are not exempt from the prohibitions on subsidies contingent on export performance (section 16) and on use of domestic goods or services (section 17).

Section 37: Section 36 procedural requirements

136. Section 37 sets out the procedural requirements attached to subsidies given as minimal financial assistance under section 36.
137. Subsection (1) and (2) set out the requirements for a public authority before they award a subsidy under this exemption. Subsection (1) states that they must provide the intended recipient with a notification and subsection (2) sets out what should be contained in that notification, including obtaining written confirmation from the recipient that the amount it is receiving will not lead to it breaching the threshold set out in section 36(1). A public authority cannot award a subsidy until it has received such confirmation from the intended recipient of the subsidy (subsection (3)).
138. Subsection (4) and (5) sets out the details of the confirmation a public authority is required to give an enterprise receiving a subsidy. Subsection (6) and (7) requires the recipient of the subsidy to keep a written record about subsidies they have received through this exemption for at least three years from the date the subsidy was given.

Section 38: Services of public economic interest assistance

139. Subsection (1) sets out the exemption for SPEI assistance. Subsidies given through the exemption do not have to apply the subsidy control requirements if the total amount of minimal or SPEI financial assistance received by the intended beneficiary does not exceed £725,000 over a three financial year period.
140. However, under subsection (4) the transparency requirements do apply to subsidies given as SPEI assistance where the amount of subsidy is more than £100,000.
141. The definition of ‘minimal or SPEI financial assistance’ is set out at section 42(8). The three-year period is calculated as the two previous financial years and the elapsed part of the current financial year.
142. A public authority giving a subsidy through this exemption must confirm they are doing so to the subsidy recipient. A subsidy given through the SPEI assistance exemption must be given to an enterprise that is delivering a particular task in the public interest.
143. For subsidies given as cash, it is the gross cash amount that determines the value of the subsidy. Where a subsidy is given within this exemption through another means, such as a loan, the value of the subsidy must be expressed as a gross cash equivalent. The methodology for determining the gross cash equivalence of a subsidy may be set out in regulations, as provided for in section 82.
144. Subsidies relating to goods awarded through this exemption are not exempt from the prohibitions on subsidies contingent on export performance (section 16) and on use of domestic goods or services (section 17).

Section 39: Section 38 procedural requirements

145. Section 39 sets out the procedural requirements attached to subsidies given under Section 38, ‘SPEI assistance’.
146. Subsection (1) and (2) set out the requirements for a public authority before they award a subsidy under this exemption. Subsection (1) states that they must provide the intended recipient with a ‘SPEI assistance’ notification and subsection (2) sets out what should be contained in that notification, including obtaining written confirmation from the enterprise that the amount it is receiving will not lead to it breaching the threshold set out in section 38(1). A public authority cannot award a subsidy until it has received such confirmation from the intended recipient of the subsidy (subsection (3)).
147. Subsections (4) and (5) sets out the details of the confirmation a public authority is required to give an enterprise receiving a subsidy as set out in section 39(3). Subsections (6) and (7) require the subsidy recipient to keep a written record about subsidies they have received through this exemption for at least three years from the date the subsidy was given.

Section 40: Mergers and acquisitions

148. In the case of mergers and acquisitions, all prior minimal or SPEI financial assistance subsidies granted before the merger or acquisition should be taken into account when calculating the sum total of exempted subsidy the ‘single enterprise’ has received.
149. Equally, where a ‘single enterprise’ separates into two or more enterprises, the enterprise taking over the activity in respect of which the minimal or SPEI financial assistance subsidy was granted should be allocated the subsidy value. Where that is not possible, the subsidy value is to be allocated proportionately between the new enterprises at the effective date of their separation.

Section 41: Subsidy database: exemption for certain subsidies given to SPEI enterprises

150. Section 41(1) provides an exemption from the transparency requirements for subsidies given to a SPEI enterprise for the purpose of the provision of SPEI services, where the subsidy is no more than £100,000.

Section 42: Chapter 2: supplementary and interpretative provision

151. Subsection (1) allows the Secretary of State to make regulations subject to the affirmative resolution procedure to:
     1. amend the value thresholds for the ‘minimal financial assistance’ and ‘SPEI assistance’ exemptions as well as the transparency threshold for subsidies given to SPEI enterprises;
     2. provide for a lower value threshold for the ‘minimal financial assistance’ and ‘SPEI assistance’ exemptions, and the transparency threshold for subsidies given to SPEI enterprises, in the case of particular descriptions of subsidy ;
     3. amend the transparency thresholds for ‘minimal financial assistance’ and ‘SPEI assistance’; and
     4. amend the transparency thresholds for ‘minimal financial assistance’ and ‘SPEI assistance’ in the case of particular descriptions of subsidy.
152. The power under subsection (1)(a) may be used to increase the thresholds up to the amounts specified under subsection (2), which are the amounts currently specified in the TCA. This is without prejudice to section 31 of the Future Relationship Act 2020 which allows the Secretary of State to make regulations to amend legislation in response to changes in the TCA.
153. Subsections (4) and (5) provide that regulations that amend the transparency threshold amounts for ‘minimal financial assistance’ and ‘SPEI assistance’ may not specify an amount exceeding the thresholds specified in sections 36(1) and 38(1), which are the thresholds under which ‘minimal financial assistance’ and ‘SPEI assistance’ may be given.
154. Subsection (8) defines ‘minimal or SPEI financial assistance’. This sets out the different categories of subsidies that should cumulate as part of determining whether the value threshold for the ‘minimal financial assistance’ and ‘SPEI assistance’ exemptions have been breached.

Chapter 3: Emergencies etc.

Section 43: Natural disasters and other exceptional circumstances

155. Subsection (1) states that subsidies given to compensate damage caused by a natural disaster or other exceptional circumstances are exempt from complying with the subsidy control requirements. Subsection (5) states that for the purpose of this exemption subsidies are not exempt from the transparency requirements of the regime.
156. Subsection (2) clarifies that an exceptional circumstance cannot be only economic in nature.
157. The use of this exemption is restricted in that it can only be used when the Secretary of State has published a notice stating a particular emergency has occurred and therefore the ‘natural disasters and other exceptional circumstances’ exemption can be used to remedy that situation. A published notice must be laid in Parliament and may be withdrawn by the Secretary of State.

Section 44: National or global economic emergencies

158. Subsection (1) states that the provisions on prohibited and restricted subsidies in sections 15 to 29 do not apply to subsidies that are given in response to a national or global economic emergency. Subsection (2) clarifies subsidies given through this exemption must be temporary in nature as part of responding to the damage caused by such an economic emergency.
159. The use of this exemption is restricted in that it can only be used when the Secretary of State has published a notice stating a particular emergency has occurred and therefore the ‘national or global economic emergency’ exemption can be used to remedy that situation. A published notice must be laid in Parliament, and may be withdrawn by the Secretary of State.

Chapter 4: Other miscellaneous exemptions

Section 45: National security

160. This section makes clear that subsidies given to safeguard national security are not subject to the subsidy control regime. This section is without prejudice to our international commitments and must be considered in light of them.

Section 46: Bank of England monetary policy

161. This section sets out that the Bank of England’s monetary policy activities are not subject to the subsidy control regime.

Section 47: Financial stability

162. This section provides the power for HM Treasury to give financial stability directions for prudential reasons providing that one or more of the subsidy control requirements (such as transparency obligations) do not apply to the giving of a subsidy or subsidy scheme set out in the financial stability direction.
163. Subsection (2) establishes that a financial stability direction is a direction given by the Treasury, providing that certain subsidy control requirements set out in the financial stability direction do not apply to the giving of specified subsidies or the making of specified subsidy schemes. A financial stability direction may also disapply subsidy control requirements in relation to types of subsidies or subsidy schemes specified in the financial stability direction.
164. Subsection (3) establishes that the Treasury may only give financial stability directions where appropriate for prudential reasons. These prudential reasons can include, for example: (a) the protection of investors, depositors, policyholders or persons to whom a fiduciary duty is owed by a financial services supplier, or (b) ensuring the integrity and stability of the financial system of the UK.
165. Subsections (4) and (5) establish that the Treasury must consult the Bank of England before giving a financial stability direction. A financial stability direction in relation to a subsidy given only by the Bank of England or a subsidy scheme made only by the Bank of England may only be given at the request of the Bank of England.
166. Subsection (6) establishes that a financial stability direction must be published in whatever manner the Treasury considers appropriate. Financial stability directions must also be laid before Parliament.
167. Subsections (7) establishes that the Treasury may delay the publication and laying in Parliament of a financial stability direction where doing so would have the effect of undermining the purpose for which the direction was given until such a time as the Treasury is satisfied that publication and laying in Parliament would not have that effect.
168. Subsection (8) sets out the definitions of "financial service supplier" and "specified".

Section 48: Legacy and withdrawal agreement subsidies

169. This section makes provision for the disapplication of the subsidy control requirements in relation to certain legacy and withdrawal agreement subsidies.
170. Subsection (1) sets out those legacy subsidies for which the subsidy control requirements will not apply.
171. Subsection (2) sets out that the rules on transparency will apply to subsidies given under legacy schemes under subsection 1(a) except for those subject to the provisions of Part IV or Annex 2 of the WTO Agreement on Agriculture or relating to trade in fish and fish products, or the audiovisual sector.
172. Notwithstanding the application of transparency requirements, the subsidy control regime set out in this Act will not impose additional requirements on subsidies that are granted under schemes that were made in compliance with the relevant rules at the point the scheme was made, including:
     1. legacy schemes that were made under EU State aid rules before the end of the Implementation Period on 31 December 2020 (including schemes that were set up before the UK’s accession to the EU and were considered ‘existing aid’ for EU State aid purposes);
     2. legacy schemes that were made between 1 January 2021 and the date on which this Act comes into force; and
     3. subsidies given under Regulation (EC) No 1370/2007 (which is directly applicable as retained EU law in the UK1 and operates analogously to a scheme set up under EU State aid rules.
173. Nor will the requirements in this Act be imposed on subsidies or subsidy schemes that are subject to Article 10 of the Northern Ireland Protocol, or Article 138 of the Withdrawal Agreement, which covers (amongst other things) the application of EU State aid rules to subsidies given for programmes and activities already committed (European Union law applicable after 31 December 2020 in relation to the United Kingdom's participation in the implementation of the European Union programmes and activities committed under the MFF 2014–2020 or previous financial perspectives).
174. Subsection (4) omits Article 9 from the subsidies permitted in subsection (1)(b). Article 9 of Regulation (EC) No 1370/2007 states in accordance with the common market which England, Wales and Scotland are not a part of. The territorial extent of subsection 48(4) is limited to England, Wales and Scotland, see section 90.

Section 49: Tax measures

175. This section specifies that the subsidy control requirements do not apply to a tax measure which is permitted under Article 413 of the TCA. This Article specifies that if there is any conflict between that Agreement and any tax convention, then the tax convention shall prevail to the extent of the inconsistency and that the provisions on subsidy control in the Agreement to not apply to an advantage accorded pursuant to a tax convention.
176. Article 413 also specifies that the subsidy control provisions do not to prevent the adoption, maintenance or enforcement of any non-discriminatory measure that aims at ensuring the equitable or effective imposition or collection of direct taxes or distinguishes between taxpayers who are not in the same situation.

Section 50: Large cross-border or international cooperation projects

177. This section excludes subsidies for large cross-border or international cooperation projects from the duty in Section 12 where the condition in subsection (3) is met. These projects typically include, for instance, efforts between two or more states to develop new technologies.
178. The condition in subsection (3) is that:
     1. the benefits of the project must not be limited to just that of the participating enterprises, sectors, or States; and
     2. the project must have wider positive effects that are not limited to the participating enterprises, sectors, or the UK.
179. Subsection (4) includes illustrative and non-exhaustive examples of large cross-border and international cooperation projects.

Section 51: Nuclear energy

180. This section excludes nuclear energy from the requirements in section 13.