CHAPTER 9
State Aid9.1 The following should not be taken as an exhaustive guide to the complex rules and cases of EU State aid. Of necessity the following is just a sketch of the state aid issues which may affect the granting by billing authorities of rate relief.
9.2 European Union competition rules generally prohibit Government subsidies to businesses. Relief from taxes, including non-domestic rates, can constitute state aid. Billing authorities should bear this in mind when granting discretionary rate reliefs.
9.2 Empty property and transitional reliefs are regarded as part of the determination of liability, applied equally to all ratepayers, and so are not considered to be state aid.
9.3 Rate relief for charities and non-profit making bodies is not normally considered to be State aid, because the recipients are usually not in market competition with other businesses. However, if the charities or non-profit making bodies are engaged in commercial activities or if they are displacing an economic operator or if they have a commercial partner, rate relief could constitute State aid and the rules set out below will apply.
9.4 Hardship relief can also constitute state aid, as can relief under the village shop and farm diversification schemes. In practice, however, aid to village shops, most local, "commercial" charities and other small-scale, local service organisations (B&Bs, small retailers, child-care facilities, etc.) will not be caught by the state aid rules, as long as they are independent, family-owned businesses, because they are deemed incapable of affecting intra-Community trade. Any manufacturing operation, on the other hand, however small-scale, is normally deemed to be capable of affecting intra-Community trade, so rate relief for butchers and farmers for example, producing cheese, sausages, cider and other foodstuffs would be state aid.
9.5 There are also general exceptions from the state aid rules where the aid is below a "de minimis" level. This is €100,000 (around £63,000) to any one business over three years. The de minimis level applies to all de minimis aid received, including other Government subsidies or grants, in addition to any rate relief. This de minimis threshold does not apply in certain excluded sectors, including agriculture, fisheries, transport, coal and steel, and aid to export-related activities, where any amount of rate relief is state aid. As far as agriculture is concerned, rate relief for farmers would not be eligible for De Minimis aid, but rate relief for farm diversification projects, which do not involve the production, processing and marketing of agricultural goods, would be eligible. There are a number of administrative requirements relating to de minimis aid and authorities considering using it should contact the DTI's State Aid Policy Unit. The exchange rate that applies is the one for the month in which the aid is given and can be found at http://europa.eu.int/cgi-bin/make_inforeuro_page/en/gbp
9.6 Guidance on State aid is available at http://www.dti.gov.uk/europe/stateaid and the DTI's State Aid Branch can be contacted at:
State Aid Branch
2nd - Floor
Kingsgate House
66-74 Victoria Street
London SW1E 6SW
E-mail: sapu@dti.gsi.gov.uk9.7 Where relief does constitute State aid, it may need legal clearance from the European Commission. Authorities that are considering granting any hardship relief, charity relief or farm diversification relief which would be caught by the State aid rules and would bring total aid to the business concerned above the de minimis level, or granting any amount to businesses in the excluded sectors, should contact the ODPM at our enquiries address (see introduction). The ODPM will seek clearance from the Commission, if necessary. If Commission clearance is needed, the relief should not be paid until clearance has been granted.
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Published 5 December 2002
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