Guidance on state aid rules in the UK’s agricultural and fisheries sector.
State aid is the use of national money to fund various projects, schemes or activities in the UK. All state-aided schemes are subject to regulations laid down by the European Commission, in line with articles 107 and 108 of the treaty functioning of the European Union (TFEU).
Defra is responsible for state aid rules in the UK’s agricultural and fisheries sector.
When a Member State provides financial aid to selected companies and organisations it may provide them with an advantage which distorts or interferes with the smooth running of the internal market.
State aid is defined as “any aid granted by a member state or through state resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain good and affects trade between member states”. This definition is the basis of the ‘4 Tests’. To assess the presence of state aid, you can check if the measure (the form of support):
- is being provided by the state or through state resources
- favours particular undertakings or the production of certain goods
- affects tradeable activity between Member States
- distorts competition, or does it have the potential to distort competition
If you want to fund a project that meets all of the 4 tests, then you need to get state aid clearance.
Public money spend: the process
Identify the sectors affected by your project
You need first to identify the sectors which will be affected when your project is up and running.
If the objectives of the project cross a number of sectors, then you may need to liaise with more than one government department.
State aid can be awarded in various forms and does not have to be in the form of cash grants to farmers. It can be provided in the form of training, providing advice, consultancy services and education. Other activities include, purchasing land, restoration of land and stone walls and buildings. The list is exhaustive but not limited to diversification of farming activities, agri-environment, and animal health and welfare schemes.
Contact the department responsible
You should then make contact with the department who has responsibility for the sector concerned. It is useful to set out, in the form of a case paper:
- the project objectives
- total amount of aid to be spent on the parts of the project affecting the agricultural sector
- information on how the projects will be run,
(If pathways are to be constructed, then explain if the path runs through agricultural land as well as the purpose of the pathway, is it for tourism purposes or will it lead tourists to the farm shop/cafe to buy local produce or buy refreshments after a long afternoon on a nature trail).
BIS have produced a state aid assessment form, and we would assess your project using similar criteria that is set out in their advice. We will work with you to identify how to make your project fit within the state aid regulations.
What constitutes an agricultural product
Agricultural aid supports the production of agricultural products and related activities.
An agricultural product is one listed in Annex 1 to the treaty establishing the European Communities.
Annex 1 lists most products which are the result of primary agricultural production and includes some products which have been simply processed. The list of annex 1 products and their codes are exhaustive and below are a few examples of what is listed as annex 1 and non annex 1.
Each type of product has a number according to the Combined Nomenclature. To work out whether a particular product is Annex 1:
- Go to the HM Revenue and Customs uktradeinfo ICN website.
- Enter your product type and you will be given a code.
- You code is Annex 1 if it begins with any of the following numbers: 01, 02, 03, 04, 0504, 0515, 06, 07, 08, 09, 10, 11, 12, 1302, 1501, 1502, 1503, 1504, 1507, 1512, 1513, 1517, 16, 1701, 1702, 1703, 1705, 1801, 1802, 20, 2204, 2205, 2207, ex 2208, ex 2209, 2210, 23, 2401, 4501, 5401, 5701.
Annex 1 can be very complicated and easily misinterpreted.
Activities carried out on farms which are not related to the production, processing or marketing of an Annex 1 product (eg bed and breakfast accommodation, conversion of redundant farm buildings into office space) are not agricultural.
If you are not sure whether your project involves aid to agriculture, you should contact Defra or the relevant devolved administration for specific advice:
- Defra: e-mail: firstname.lastname@example.org, telephone: 020 7238 1271
For further information or for a detailed analysis on your products classification please do call us with the complete product code.
State aid rules
The rules for state aid ensure all schemes are compatible with the treaty. This ensures transparency, uniformity and consistency across the UK and EU Member States with similar schemes. There are a number of regulations that govern various activities in the agricultural sector. The articles in the regulations clearly state the requirements, ie measures for a scheme, level of support allowed, as well as highlighting what is not permitted.
The rules set out in detail:
- the objective of aid
- how the aid is delivered (measures)
- who can benefit
The rules set out in the community guidelines for state aid in the agricultural and forestry sector are available on the European Commission’s website. These cover all types of permitted agricultural state aid. However, many types of aid covered by these guidelines may also exempt from prior approval by a Block Exemption Regulation 1857/2006. The Block Exemption is the most commonly used route to clear state aid. Other options for clearing a project are dependent on things like budget, sector and activity. The various types of clearance and their approximate time frames are:
- full notification using the guidelines minimum of 6 months
- exemption regulation from 20 working days depending on complexity
- ‘De Minimis’ - 3 days
- industrial ‘De Minimis’ - 1 day
- general block exemption regulation (GBER) - from 20 working days depending on complexity
Where to find the rules
- EUR-Lex website
- Community guidelines for state aid in the agriculture and forestry sector 2007-2013: update due by July 2014
- Agriculture Block Exemption Regulation (1857/2006): update due by July 2014
- “De minimis” Regulation for Agriculture (1408/2013)
Contact your local state aid expert
- Duncan Kerr - 0207 238 3054
- Iain Tomlinson - 0207 238 1271
- For general enquiries
- Diane Steele - 0300 244 1187
- Catriona Syme - 0300 244 1186 Catriona.Syme@Scotland.gsi.gov.uk
- Colin Fletcher - 028 905 24780
- Neil Howard - 01970 613295
- Charlotte Cosseratt - 01970 613224
- Mike Render - 01223 773070 email@example.com
State aid in other sectors
Defra is responsible for state aid rules in the UK’s agricultural and fisheries sector only. For other sectors please contact: