Notice

Annex E - Subsidy Control

Updated 30 September 2022

UK Space Agency Subsidy Control Guidance for Grant Applicants

1. The UK Space Agency (UK Space Agency) supports organisations to invest in research, development and innovation. The support we provide is consistent with the UK’s international obligations and commitments to Subsidy Control (see further information at Annex A).

2. Before awarding subsidies, the UK Space Agency must ensure that the subsidy scheme meets the terms of the principles as determined in the UK-EU Trade & Cooperation Agreement (TCA):

The principles are that:

· subsidies should pursue a specific public policy objective to remedy an identified market failure or to address an equity rationale such as social difficulties or distributional concerns (“the objective”)

· subsidies should be proportionate and limited to what is necessary to achieve the objective

· subsidies should be designed to bring about a change of economic behaviour of the beneficiary that is conducive to achieving the objective and that would not be achieved in the absence of subsidies being provided

· subsidies should not normally compensate for the costs the beneficiary would have funded in the absence of any subsidy

· subsidies should be an appropriate policy instrument to achieve a public policy objective and that objective cannot be achieved through other less distortive means

· subsidies’ positive contributions to achieving the objective should outweigh any negative effects, in particular the negative effects on trade or investment between the Parties

1. To ensure this competition provides funding in line with the UK’s obligations and commitments to Subsidy Control the intervention rates detailed in Annex A shall apply unless:

a) the bidder seeks to claim exemption from having to make a financial contribution to the project under the Small Amounts of Financial Assistance Allowance (previously known as de-minimis under State Aid) rules.

b) the bidder is a research or public sector organisation or charity:

When referring to research organisations, UK Space Agency uses the following definition:

‘research and knowledge dissemination organisation’ or ‘research organisation’ means an entity (such as universities or research institutes, technology transfer agencies, innovation intermediaries, research-oriented physical or virtual collaborative entities), irrespective of its legal status (organised under public or private law) or way of financing, whose primary goal is to independently conduct fundamental research, industrial research or experimental development or to widely disseminate the results of such activities by way of teaching, publication or knowledge transfer. Where such entity also pursues economic activities, the financing, the costs and the revenues of those economic activities must be accounted for separately. Undertakings that can exert a decisive influence upon such an entity, for example in the quality of shareholders or members, may not enjoy a preferential access to the results generated by it.”

Within UK Space Agency, this means:

§ universities – higher education institutions

§ non-profit research and technology organisations (RTOs), including catapults

§ public sector organisations (PSOs)

§ public sector research establishments (PSREs)

§ research council institutes

§ research organisations (ROs)

§ charities.

This list is not comprehensive and is subject to change and exceptions.

Research organisations undertaking non-economic activity will be funded as follows:

§ universities: 80% of full economic costs

§ all other research organisations: 100% of eligible costs.

Research organisations should be non-profit distributing to qualify. They should explain how they will disseminate the output of their project research as outlined in the application.

Research organisations which are engaged in economic activity as part of the project will be treated as business enterprises for the purposes of funding

Public sector organisation or charity

Public sector organisations and charities can work with businesses to achieve innovation through knowledge, skills and resources. These organisations must not take part in any economic activity or gain economic benefit from a project. They can apply for 100% of funding for their eligible costs under the following conditions:

§ they are undertaking research (this may be experimental, theoretical or critical investigation work to gain knowledge, skills or understanding vital to the project)

§ they meet requirements for dissemination of their project results and they state in the application how they will do this

§ they include their eligible costs for research purposes in the total research organisation involvement

§ they make sure they are not applying for funding towards costs which are already being paid by the public purse such as labour and overheads.

Third sector

Third sector organisations are primarily voluntary and community, such as associations, self-help groups, mutuals and cooperatives. Third sector organisations can be non-funding partners in a project.

Bidders must identify the work proposed, and this must be consistent with the work programme described in the technical case. Note that the company size defines the maximum ‘Intervention’ rate (and hence the minimum required PV level) that is permitted (see Annex A). Bidders will be expected to justify the category of work selected.

1. Bidders must ensure that they supply the correct information that allows UK Space Agency to award grants within the scheme. It is the responsibility of the grant funder to ensure compliance with the relevant Subsidy Control rules and the bidder to assist the funder in doing this by acting within the terms and conditions of the scheme. Further guidance about subsidy control is available on the gov.uk website:

https://www.gov.uk/government/publications/complying-with-the-uks-international-obligations-on-subsidy-control-guidance-for-public-authorities

Subsidy Control (and State aid where relevant)

UK Space Agency supports UK based businesses to invest in research, development and innovation. The support we provide is consistent with the UK’s international obligations and commitments to Subsidy Control. These include:

· WTO rules

· the EU-UK Trade and Cooperation Agreement (TCA), (see EU-UK TCA summary and BEIS (Dept. for Business, Energy & Industrial Strategy) guidance)

· in certain very limited circumstances (e.g. under the Northern Ireland Protocol) EU State aid regulations may also be applied

0.1 What is a subsidy?

For the purposes of UK international commitments, a subsidy is a measure which:

1. Is given by a public authority. This can be at any level; central, devolved, regional or local government or a public body.

2. Makes a contribution (this could be a financial or an in-kind contribution) to an enterprise, conferring an economic advantage that is not available on market terms. Examples of a contribution are grants, loans at below market rate, or a loan guarantee at below market rate or allowing a company to use publicly owned office space rent free. An enterprise is anyone who puts goods or services on a market. An enterprise could be a government department or a charity if they are acting commercially.

3. Affects international trade. This can be trade with any World Trade Organisation member or, more specifically, between the UK and a country with whom it has a Free Trade Agreement. For example, if the subsidy is going towards a good which is traded between the UK and the EU this could affect trade between the EU and the UK. It is not necessary to consider whether the subsidy could harm trade, just whether there could be some sort of effect. Subsidies to very local companies or a small tourist attraction are unlikely to affect international trade.

The UK Subsidy Control regime (or where relevant EU State aid regulations) are designed to prevent unfair advantages and distortion of trade: Complying with the UK’s international obligations on subsidy control

More information on the principles of awarding subsidies can be found in the BEIS guidance.

Subsidy Control Categories and Intervention Thresholds

Unless otherwise stated, the following table summarises the maximum intervention thresholds allowable level of support under UK Space Agency grant calls for Financial Year 2021/2022.

Subsidy category	Level of support available
Micro/Small Enterprise	Medium Enterprise	Large Enterprise
Fundamental research	100%	100%	100%
Feasibility study	70%	60%	50%
Industrial research	70%	60%	50%
Industrial research projects involving collaboration/ dissemination*	80%	75%	65%
Experimental development	45%	35%	25%
Experimental development projects involving collaboration/dissemination*	60%	50%	40%

*Collaborations between businesses and research organisations where the research organisation bears at least 10% of the costs and have the right to publish their own research. Procurement/supplier relationships do not qualify.

The following table summarises the UK definition of what constitutes an SME:

Company category	Staff headcount	Turnover	or	Balance sheet total
Medium sized	< 250	≤ £36m	≤ £18m
Small	< 50	≤ £10.2m	≤ £5.1m
Micro	< 10	≤ £632,000	≤ £316,000

To qualify for any category, the company must meet at least two of the above conditions (staff headcount, Turnover or Balance sheet total) within both the current financial year and the year previous.

Anything above the limits for a medium sized company is designated as a large company. For more information on company sizes, please refer to the company accounts guidance. This is a change from the EU definition unless you are applying under State aid.

Other sources of public funding are not eligible as a Private Venture (PV) / match funding contribution.

Academic partners will be funded in all cases at 80% of Full Economic Cost (FEC).

1. Special Drawing Rights (SDRs) and EU de minimis awards

The UK-EU Trade & Cooperation Agreement (TCA) has provision relating to Small Amounts of Financial Assistance (SAFA).

For organisations applying for SAFA, the total subsidy which can be given to each organisation is up to a maximum of 325,000 which at current exchange rates converts to £340,000, over a rolling 3 fiscal year period. This threshold is subject to change due to exchange rates and grant recipients should consult the subsidy control guidance for regular updates.

When calculating eligibility for the application of the SAFA provision bidders must include cumulation of EU State aid de minimis grants under the EC’s de minimis regulation for the same 3 fiscal year period. The maximum total under the EC regulation is €200,000. You must complete and provide UK Space Agency with a declaration as part of your response.

The declaration asks you to tell us about any awards, including those made under de minimis and SDR, (from any source of public funding) over a rolling 3 fiscal year period.

If you have received an award under de minimis for the same period, this will be added to your total allowance under SDR. This means that the total award must not exceed approximately £340,000 (325,000 SDR) for any one organisation. You must declare this allowance to any other funding body who requests it.