Minimal financial assistance: considerations for public authorities

What are the exemptions?

Public authorities do not need to carry out a subsidy control compliance assessment against the principles set out in the Act in respect of MFA subsidies. Most of the Act’s other substantive requirements also fall away.

What’s the threshold?

The MFA regime allows public authorities to award low value subsidies, up to £315,000.

However, £315,000 is a cumulative total. A recipient can receive no more than £315,000 in MFA or comparable types of subsidies over the elapsed part of the current financial year and the two financial years which precede the current financial year.

What are comparable types of subsidies?

As per HMG’s Statutory Guidance:

• MFA subsidies;
• SPEI assistance;
• De minimis EU State aid; and
• Subsidies given as small amounts of financial assistance under the UK-EU Trade and Cooperation Agreement.

Examples

Assuming a subsidy is to be awarded in the current financial year (2022/2023), a recipient cannot have received a comparable subsidy since 1 April 2020 which in cumulation with the subsidy to be awarded has a value of £315,000 or more. By way of example:

What if a low-value subsidy is not an MFA subsidy due to cumulation?

The recipient of the low-value subsidy can elect to receive part of the subsidy up to the threshold. In the right-hand example above, the recipient could receive £65,000.

However, any amount awarded over and above that figure will be subject to the full subsidy control requirements, including a subsidy control compliance assessment against the principles set out in the Act.

MFA procedural requirements

There are still procedural requirements arising from MFA subsidies. Depending on the value of the subsidy, these requirements are divided over either two or three stages:

1. MFA notification – a written statement provided to the intended recipient pre-award. Amongst other things, the notification should request written confirmation that the recipient will not exceed the cumulative threshold on receipt of the subsidy.
2. MFA confirmation – a written statement provided to the intended recipient concurrently to award. The subsidy can only be awarded, and the confirmation issued, once the recipient has provided written confirmation in response to the MFA notification.
3. Transparency rules – if the value of the MFA subsidy exceeds £100,000, the Act’s transparency rules apply (note that this threshold is not cumulative – it only relates to the MFA subsidy in question). The transparency rules include publishing the subsidy on HMG’s subsidy database.

SPEI

Authorities should note that the separate SPEI regime allows subsidies up to £725,000 to be awarded without the majority of the Act’s requirements applying where the subsidy relates to particular tasks in the public interest.

Discussion

On the face of it the MFA regime offers authorities a welcome exemption from the stringent requirements of the Act. But scratch a little deeper and it becomes apparent that the procedural requirements, despite being light touch in comparison to the usual obligations, nevertheless require careful thought and attention.

Issuing an MFA notification and confirmation is a statutory requirement, and each of the documents has to include certain information and statements to comply with the statutory regime. We work with authorities to ensure compliance and can offer precedent forms for ongoing use by in-house legal teams. We also help clients document their process of deciding and ensuring that any particular subsidy is MFA.

Authorities may query why the MFA threshold is comparatively low compared to many routine subsidy awards. We help authorities overcome this issue, including by considering streamlined routes where applicable.

Sharpe Pritchard’s subsidy control team is fully conversant with the requirements and procedures of the new legal regime. We advise authorities across a wide variety of subsidy control matters, ranging from MFA awards in the low thousands to schemes of particular interest in the hundreds of millions.

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This article is for general awareness only and does not constitute legal or professional advice. The law may have changed since this page was first published. If you would like further advice and assistance in relation to any issue raised in this article, please contact us by telephone or email enquiries@sharpepritchard.co.uk