June 30 2021

New UK Subsidy Control System Envisages Supporting Businesses Post-Brexit

Source: IBFD Tax Research Platform News

Following the Queen's key speech of 11 May 2021, on 30 June 2021, the United Kingdom introduced a new subsidy control system (the Subsidy Regime), which envisages replacing the EU State aid regulatory framework, to Parliament. The new UK subsidy regime aspires to provide UK businesses with quick and flexible financial support and encourages economic growth across the United Kingdom post-Brexit.

The key elements of the new UK subsidy regime are the following:

  • it will be based on the premise that subsidies are permitted on condition that they follow UK-wide principles, such as the delivering of good value for the UK taxpayer in a timely and effective manner;
  • UK public authorities enforced with implementing the new UK subsidy regime will deliver subsidies where they are needed without having to comply with excessive prerequisites;
  • the devolved governments of Scotland, Wales and Northern Ireland will be enforced to decide on the issuance of subsidies by following a set of UK-wide principles;
  • the new UK subsidy regime will prohibit the issuance of subsidies that will result in the relocation of jobs and economic activity from one part of the United Kingdom to another;
  • unlimited government guarantees to businesses, as well as subsidies granted to "ailing or insolvent" enterprises, will be abolished in cases where no credible restructuring plan is presented;
  • towards protecting and maintaining competition and investment, the new UK subsidy regime will introduce two specific categories of subsidies, i.e. "subsidies of interest" and "subsidies of particular interest", for which public authorities may conduct a more extensive analysis in order to assess compliance with UK-wide principles; and
  • compliance with the new UK subsidy regime will be enforced through the UK courts and tribunal system. The Competition Appeal Tribunal will also be responsible for judicially reviewing the issuance of subsidies.

The new UK subsidy regime will take effect in 2022 subject to parliamentary approval.

The press release can be accessed here.