When considering projects which include non-agricultural activities, Case Officers will need to establish whether State Aid rules apply. Each proposed activity within an application may need to be considered separately. It is important to note that it is the activity which is crucial, not the type or status of the applicant. So funding allocated to a registered charity or community group may be considered as a State Aid if they are going to use the money for a commercial purpose.
This assessment should be done as early as possible in the development of a project. Although a full assessment may not be possible until Proposal stage, Case Officers should highlight to applicants at SoI stage where they suspect that some or all of the activities may be affected by State Aid rules. This will also allow them to ensure they have all the information at Proposal stage to carry out the assessment set out below.
There are five criteria or questions which need to be answered in relation to all applications for funding for Axis 1 non-agricultural and Axis 3 in order to establish whether funding for a particular activity constitutes State Aid. Only for activities where all 5 criteria are met do the State Aid rules apply. Axis 1 agricultural and Axis 2 non-commercial agri-environmental activities are exempt from State Aid rules
Where one or more of the criteria is not met, then funding is unlikely to constitute State Aid and the application can proceed through the usual assessment process.
If a Case Officer is unsure whether all the criteria are met, they should send details of the case to the Customer Service Desk for further consideration by the SRDP Team.
The five criteria are set out below:
- Is the measure granted by the state or through state resources? As SRDP funding is distributed by central government, the answer to this will always be yes.
- Does it confer an advantage to an undertaking? A benefit to an undertaking, granted for free or on favourable (non-commercial) terms, could be State Aid. This includes the provision of grants. Providing some or all of the costs of an investment from state resources is generally considered to give an advantage. Consequently, the answer to this is likely to be yes.
- Is it selective, favouring certain undertakings? As the UK and not Scotland is a member state of the European Union, all grants available exclusively in Scotland and not all parts of the UK (as with the SRDP), would be considered geographically 'selective'. Therefore, the answer to this will always be yes.
- Does the measure distort or have the potential to distort competition? If the grant will strengthen the position of the recipient relative to other competitors then this criterion is likely to be met. The potential to distort competition does not have to be substantial or significant. Consequently, the answer to this is likely to be yes for all commercial activities, regardless of the type of organisation carrying them out.
- Is the activity tradable between member states? The European Commission's interpretation of this is broad - it is sufficient that a product or service is subject to trade between member states, even if the aid beneficiary itself does not export to the EU. Most activities are viewed as tradable, so the answer to this is likely to be yes.
IMPORTANT - A record of the results of the questions for each Proposal assessed should be placed on the relevant file.
Please see the process to follow if your think the five State aid criteria are met.