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Employment Allowance and De Minimis State Aid

Posted on 22nd April 2020 - Our news

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From 6 April 2020, the rules for claiming the Employment Allowance (EA) changed to include new criteria which must be met before you are able to claim it.

As part of those changes, the EA is now classed as de minimis state aid and so counts towards the total such aid that you are allowed to receive over a rolling three year period.  These rules continue under the transitional period for the UK leaving the EU and are expected to form part of our ongoing agreement.

Before you make a claim to the EA in any year, you therefore have to make sure that this will not make you exceed the de minimis state aid threshold for your sector.

How to work out how much de minimis state aid you have received

  1. Check if you have received any de minimis state aid
  2. Add the total amount of de minimis state aid that you’ve received or been allocated for the current and previous 2 tax years; connected companies should add their totals together
  3. Add this to the full amount of EA for the year you’re claiming for. This has to be converted to euros using the exchange rate at the end of the previous tax year; for the 2020/2021 claim, this is €4,500
  4. If the total is below the threshold for your sector, you are eligible to make a claim

What counts as de minimis state aid

The definition of de minimis state aid is very broad and can include state grants, subsidies and other government funded financial incentives.

However, any paperwork you receive for such payments will state clearly that it is de minimis state aid and therefore must be counted for these purposes.

It is less likely that general businesses will be affected by these rules due to the €200,000 limit but, for those in the agriculture or fisheries sectors, the lower limits could affect their entitlement to the EA.

It has recently been confirmed that the following payments received from Defra do not count towards your de minimis state aid allowance:

  • Water environment grant
  • Basic payment scheme
  • Countryside stewardship
  • Countryside productivity
  • RDP LEADER grants

Covid-19 and de minimis state aid

Most of the schemes implemented as part of the UK Government response to the Coronavirus crisis are not subject to state aid control.

However, the following schemes are classed as state aid but, depending on the scheme, special rules may apply under the Covid-19 Temporary Framework which the EU has permitted each country to implement to allow these unprecedented payments to be made.

Under the Temporary Framework, payments of up to €800,000 may be made to non-agricultural businesses, with a limit of €100,000 for agricultural businesses.

  • Coronavirus Business Interruption Scheme – this scheme is being covered by the Temporary Framework
  • Retail, Hospitality and Leisure Business Grants Fund – payments will be made under the Temporary Framework
  • Small Business Grant Fund (SBGF) – the grants of £10,000 under this scheme may be made either under the usual de minimis state aid rules or under the Temporary Framework where the de minimis threshold has, or would be, exceeded

Although payments made under the Temporary Framework are in addition to the de minimis state aid thresholds, and therefore are not anticipated to affect the EA, any payment of the SBGF under the de minimis rules will impact on the future entitlement to the EA.

Based on the March 2020 exchange rate, the grant of £10,000 would equate to around €11,250; as the EA is around €4,500 each year, this could easily affect your entitlement to EA for 2020/2021 through to 2022/2023 if you are in receipt of other de minimis state aid, or fall within the agriculture or fisheries sectors.

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