How can the State aid rules be applied in light of the coronavirus outbreak?
The coronavirus outbreak has seen State support being given to businesses on an unprecedented scale.
This issue is likely to be increasingly relevant as Governments seek to protect and stimulate their economies as they emerge from lockdown.
How have the rules been relaxed in the context of the crisis and what facets of the existing law can be used for the State to provide support to undertakings?
Related FAQs
Government’s Covid-19 landing page
https://www.gov.uk/coronavirus
Covid-19 recovery strategy
Working safely during Covid-19
https://www.gov.uk/guidance/working-safely-during-coronavirus-covid-19
Working safely during Covid-19: construction and other outdoor work
Working safely during Covid-19: factories, plants and warehouses
Working safely during Covid-19: labs and research facilities
https://www.gov.uk/guidance/working-safely-during-coronavirus-covid-19/labs-and-research-facilities
Working safely during Covid-19: offices and contact centres
https://www.gov.uk/guidance/working-safely-during-coronavirus-covid-19/offices-and-contact-centres
Working safely during Covid-19: other people’s homes
https://www.gov.uk/guidance/working-safely-during-coronavirus-covid-19/homes
Working safely during Covid-19: restaurants offering takeaway or delivery
Working safely during Covid-19: shops and branches
https://www.gov.uk/guidance/working-safely-during-coronavirus-covid-19/shops-and-branches
Working safely during Covid-19: vehicles
https://www.gov.uk/guidance/working-safely-during-coronavirus-covid-19/vehicles
Business support: loans, tax relief and grants for businesses, employees and self-employed people
https://www.gov.uk/coronavirus/business-support
Education and childcare
https://www.gov.uk/coronavirus/education-and-childcare
Housing and accommodation: renting: guidance for landlords, tenants and local authorities
Housing and accommodation: moving home
Housing and accommodation: planning inspections
https://www.gov.uk/guidance/coronavirus-covid-19-planning-inspectorate-guidance
Healthcare workers, carers and care settings: NHS guidance for people working in healthcare
https://www.england.nhs.uk/coronavirus/
Healthcare workers, carers and care settings: PPE hub
https://www.gov.uk/government/collections/coronavirus-covid-19-personal-protective-equipment-ppe
Healthcare workers, carers and care settings: adult social care guidance
https://www.gov.uk/government/collections/coronavirus-covid-19-social-care-guidance
Healthcare workers, carers and care settings: shielding and protecting people who are clinically extremely vulnerable
Healthcare workers, carers and care settings: adult social care guidance
Healthcare workers, carers and care settings: health, care and volunteer workers parking pass and concessions
International travel and immigration: travel advice for British citizens travelling abroad
https://www.gov.uk/guidance/travel-advice-novel-coronavirus
International travel and immigration: foreign travel advice for each country
https://www.gov.uk/foreign-travel-advice
International travel and immigration: waiting to return to the UK
International travel and immigration: essential international travel guidance
https://www.gov.uk/guidance/coronavirus-covid-19-essential-international-travel-guidance
International travel and immigration: advice for UK visa applicants and temporary UK residents
Government’s financial support for businesses
This page help businesses find out how to access the support that has been made available, who is eligible, when the schemes open and how to apply.
https://www.businesssupport.gov.uk/coronavirus-business-support/
Rishi Sunak
The Twitter feed of the Chancellor of the Exchequer, where he has published various responses to some FAQs from the public.
https://twitter.com/RishiSunak
The change in the law has the potential to place much greater financial risks on suppliers, making it more difficult to exit a contract with a customer of doubtful solvency. This will place increased emphasis on appropriate financial due diligence and credit checking before entering into supply contracts.
In addition to the obvious issues around financial risk, suppliers will also need to think carefully about how their contracts are drafted. For example, any form of right that is drafted so as to be triggered on customer insolvency will clearly be problematic. These could include:
- Retention of Title provisions, which are commonly drafted so that the right to enter premises and retake possession of the goods is triggered on insolvency;
- Provisions for brand protection, which seek to control how goods are dealt with on termination of the contract.
This is potentially a very significant development for many businesses. We would strongly recommend specialist advice be obtained so that:
- businesses understand the potential increased risks faced; and
- where possible, contracts are updated so that appropriate protections are maintained.
State aid rules are contained in the Treaty on the Functioning of the European Union (previously referred to as the Treaty of Rome). The State aid rules prohibit the use of state resources, or any public support with an economic value, which given selectively has the capacity to distort trade by favouring certain undertakings, or the production of certain goods, and which has the potential to affect trade between Member States. Where aid is present it must not be granted unless it has been specifically approved in advance by the European Commission or benefits from a general exemption to the rules.
In general, the rules apply to all State actions which might assist businesses including:
- Grants
- “Soft” loans
- Selling to business at an undervalue
- Buying from business at an overvalue
It has now changed. Instead of being 3 weeks, it is now technically any period. However, 7 days is the minimum claim period you can now make.
Contractors working for public sector organisations who are deemed employees for IR35 purposes may be eligible to be furloughed provided they are paid via PAYE. In this scenario the agreement to furlough would be made between the contractor’s personal service company (PSC) and the fee payer (usually the agency). The parties would agree that the contractor will carry out no work for the public sector organisation while furloughed and the fee payer would apply for the grant.
At the moment the guidance states that in order to be eligible a claim for furlough must have to have been submitted by 31 July 2020 for a period of 3 weeks between 1 March and 30 June 2020.