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State Aid - Additional Information
State Aid is a very complex area. The information below provides a very basic over view. If State Aid rules do need to be adhered to then please consult the funding provider in the first instance.
Areas for specific attention regarding State Aid Rules:
Regional Aid
Within the Yorkshire and Humber region, areas that are deemed to be less favoured (commonly referred to as Objective 1 and 2) can receive higher levels of state aid. For large firms in an Objective 1 area, this can be up to 35%, for SMEs this amount goes up to 50%.
Please note: it is the project that needs to fall into an Objective 1 or 2 area and not the company itself.
To see if your project could fall into a regional aid area in Yorkshire and Humber please go here: http://www.yorkshireforward.com/www/view.asp?content_id=647&parent_id=485
Please note: as of the beginning of 2007 regional aid has changed.  The details are still being finalised please visit the Government Office website for an update.
SMEs
SMEs are entitled to extra state aid intensity to allow targeted assistance in the areas of investment, consultancy and research and development.
For SME definitions please consult this document: http://www.dti.gov.uk/files/file25591.pdf

If the SME project falls in an Objective 1 area, the maximum state intensity is 50% for investment. For R&D an additional 5% can be added.

If the SME project falls in an Objective 2 area, the maximum state aid is 25% for investment, with an additional 10% being added for R&D.

If the SME project does not fall into an Objective 1 or 2 area, then small firms can claim up to 15% for investment, and medium sized firms up to 7.5%. For R&D the rules are the same as deemed in the R&D section below.

All SMEs can claim a maximum of 50% for consultancy aid.
Research and Development
Research and Development is broken down into 3 areas
Fundamental Research – activities that broaden knowledge but are not linked to industrial or commercial objectives can receive up to 100% aid intensity
 
  • Industrial R&D – planned research aimed at the acquisition of new knowledge, with the objective that this new knowledge be sued in developing new products, processes or services. The standard rate for state aid intensity is 50%, however this can rise up to 60% if the project falls into an Objective 1 or 2 areas. The total aid can rise again to a maximum of 75% if the project is linked to the Framework programme, involves cross-border cooperation or the project outcomes are publicly disseminated or published in technical journals.
  • Pre-competitive development is the shaping of the results of industrial research into a plan, arrangement, or design for a new, altered or improved product, includes prototype creation. The standard rate is 25%, however this can rise up to 35% if the project falls into objective 1 or 2 areas. The total aid can rise again to a maximum of 50% if the project is linked to the Framework programme, involves cross-border cooperation or the project outcomes are publicly disseminated or published in technical journals.

    Further details can be found at the following link: http://europa.eu/scadplus/leg/en/lvb/l26077.htm

    •
    State Aid for Environmental Protection
    Renewable energy is seen by the European Commission as an action to protect the environment and so further State Aid rules apply. This may entitle greater state aid or leave the state aid intensity the same, if greater levels can be obtained through other rules, e.g. R&D.
    Key areas:
    • SMEs can claim 15% gross eligible costs over a period of three years towards the adoption of new and compulsory community standards
    • Investment in energy saving, combined heat and power, renewable energy are entitled for 40% state aid towards eligible costs
    • If renewable energy is of the benefit of a whole community then an additional 10% on top of the basic 40% can be claimed, to equal 50%
    • Where it can be deemed necessary by the EU member state, 100% of eligible costs can be supported by state aid to support renewable energy projects

    When the environmental activities fall into an area which is eligible for regional aid there are two options which can be considered: (1) the regional aid rate plus 10%; or (2) the environmental state aid rate, of 30% (standard rate), or 40% for energy projects, or 50% for renewable energy in communities plus 5% for regions covered by Article 87(3)(C) tier 2 and 105 for areas covered by Article 87 (3)(a), tier 1.
    De Minimis Aid Regulations
    The regulation covers small amounts of aid which do NOT count as State Aid. The threshold figure is €200,000 (which equates roughly to £140,000) over a three year period. When applying to funding programmes all forms of de minimis funding will be considered as any funding received over this level will have to be paid back by company receiving the aid.


    Eligible Costs
    Once state aid intensity has been established, this then needs to be applied to the eligible costs of the project. Eligible cost vary depending on size of the organisation, and whether regional aid is being applied for or if it is for research and development.
    Eligible costs under the State Aid for Environmental are strictly confined to the extra investment costs necessary to meet the environmental objective. For example, for the installation of a renewable power system the eligible costs would be the investment costs above what would be paid for a conventional power plant.


    Maximum Aid Intervention (£) = Eligible Costs x Maximum Aid Intensity
    Useful sources for more information
    For detailed information please consult the following sources:
    State Aid Frequently Asked Questions - DTI
    http://www.dti.gov.uk/files/file25263.pdf
    All State Aid Regulations
    http://www.dti.gov.uk/bbf/state-aid/rules/frameworks/page28712.html
    European Commission State Aid Legislation
    http://europa.eu/scadplus/leg/en/s12002.htm
       
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