Axis 3 projects must be assessed to determine if the eligible costs will be paid under de minimis. To do this you need to assess the application against the 5 State Aid "questions". These are set out below. For clarity, a number of considerations are set out below before you start the assessment.
The assessment should be done as early as possible in the development of a project. You should highlight to applicants as soon as you believe the project may be affected by State Aid rules. This will alert applicants and ensure they can provide supporting documents to allow a complete assessment to be carried out.
Things to consider
1. Is the application for a commercial purpose? Broadly what we mean by this is whether the project is being set up to make a profit? If yes, you need to carry out a de minimis assessment. If no, de minimis restrictions will not apply. Some indicative examples of a commercial project would be a bed and Breakfast, tourist accommodation or a gym. Examples of non commercial projects would be footpaths which are accessible without charge.
2. A project must be assessed in its entirety. The project cannot be broken up into State Aid and non State Aid elements. The EC view this as circumvention to maximise funding with potential trade distortion.
3. It is the activity which is crucial, not the applicant. Funding allocated to a registered charity or community group can be considered as a State Aid if they are using the funding for a commercial purpose.
4. It is important to understand that only the EC can truly determine if State Aid is present in any project. Our role is to carry out assessments using the information available to us from the EC and our State Aid specialists. It is not in our interest to apply restrictions unnecessarily but equally the project is at risk if the assessment is not carried out to a high standard or the applicant withholds critical information. If the EC determine a project should have been restricted they will recover the excess funding from the applicant not the Member State. Applicants should be aware of this. The EC can check any project at any time and always investigate public complaints in regard to State Aid.
5. A project which is subject to de minimis must be notified to the applicant by issuing Annex A with the contract. This should come as no surprise to the applicant having been discussed during the application process. You must ensure the applicant notifies you of any other de minimis funding they have received in the last 3 fiscal years.
De minimis assessment
There are five questions which need to be answered in relation to applications for funding under Axis 3 to establish if funding should be paid as de minimis. If all five questions are answered "yes" this strongly indicates that funding can only be paid as de minimis.
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 must complete the assessment sheet and send this along with the business plan to the Customer Service Desk. The issue of de minimis will then be considered by the Rural Priorities Business Support Team and in some cases may be referred to the State Aid unit for analysis.
State Aid "Questions"
The five questions are set out below with some additional guidance. Case Officers must complete the assessment sheet for each application considered.
1. Is the measure granted by the state or through state resources? SRDP funding is distributed by central government, the answer to this will always be yes.
2. 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.
3. 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.
4. 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.
5. 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.
A copy of the assessment sheet must be placed in the case file regardless of the outcome.