Spotlight on...de minimis aid

Everything you ever wanted to know about de minimis aid but were afraid to ask!

If you are involved in assigning public resources to enterprises, chances are you are aware of the existence of de minimis aid. You may already know that this is one of the few types of state aid you can give out without prior notification to the European Commission and you may have heard of the  100,000 rolling three years limit. However, there is much more you should know if you want to grant de minimis aid with confidence, so read on.

De minimis aid is not a new concept. The Commission issued a Notice on de minimis as far back as 1993 and formalised its thinking on 'small amounts of aid' by introducing a legally binding regulation in January 2001 (Commission Regulation (EC) No 69/2001).

Key features of the regulation

It is possible to grant up to  100,000 (around  65,000) of aid to a firm over a rolling three-year period without prior notification to the Commission, as long as all the terms of the regulation are met. This aid can be granted regardless of the size of the firm and for a range of purposes (see below for exclusions). The rolling three years counts from when the de minimis aid is first offered.

Aid paid as de minimis does not have to be linked to the eligible costs of a project in the way that aid under many approved state aid schemes does; the aid goes to the recipient firm directly, not towards a project. De minimis can even be used as operating aid, i.e. towards a firm's normal running costs such as staff costs or marketing. The Commission normally considers operating aid to be the most distorting kind of aid but, as long as the limit is adhered to, de minimis aid can be used for this purpose.

De minimis aid can also be used alongside aid that is granted under an approved scheme (see the approved schemes in Scotland page of our website for more information on the types of cover currently in place in Scotland).

Some well-known examples of de minimis aid include DTI's Small Firms Loan Guarantee scheme and, currently, the first stage of SMART, a scheme run by the Scottish Executive to promote innovative Research & Development projects.

Requirements of the regulation

If you give out de minimis aid, you should be aware of the following requirements:

• Aid administrators must obtain information from the recipient firm about all other de minimis aid - from all sources - received in the three years preceding the date of offer
• You must check before granting the aid that it will not bring the firm over their  100,000 threshold
• You should make recipient firms aware that the public support they are receiving is a de minimis aid by -
  Stating in the offer letter that they are being offered de minimis aid,
  Stating how much the amount is in Euros and Pounds, and
  Telling them about the  100,000 over three rolling years limit.

When de minimis is not an option

De minimis aid cannot be granted to firms in the following sectors: transport, agriculture and fisheries. In addition, de minimis cannot be given as export aid - aid directly linked to increasing quantities exported - or for aid favouring domestic over foreign goods.

Drawbacks of de minimis aid

Granting aid as de minimis may seem like the easy option, but it can be complicated to administer. The  100,000-over-three-years limit applies to de minimis aid from all sources. The more schemes that use de minimis aid as their basis, the easier it will be for firms to reach their limit. In addition, it can be difficult to find out about a firm's de minimis history because they may not know whether aid was de minimis. Our advice is that, where possible, you endeavour to ensure your aid measure can be covered by an existing approved scheme, or the SME or training block exemptions, leaving de minimis for those occasions where scope is limited or does not exist.

Our website contains more information about de minimis aid. You can also read frequently asked questions about de minimis. Alternatively, if you would like to get in touch with someone to discuss a particular case involving de minimis aid, please contact us.