The EU Commission’s decision that the Irish government’s tax agreement with Apple was illegal state aid should be a warning sign to other organisations receiving financial assistance from a public body.
Any organisation that receives such financial assistance must make sure that their own legal advice is independent, robust and carefully analyses the assistance against the state aid criteria, irrespective of assurances given by the public body.
The Irish Government made an agreement with Apple that allowed the company to pay a lower tax rate than other companies. The EU Commission ruled that this was aid to Apple, which gives it a selective advantage over other organisations, has the ability to distort the market and which could affect trade between member states. The result is that Apple will be required to pay back around €13b in tax as the Irish government claws back the illegal aid.
Although most funding authorities are very careful to point out that organisations seeking assistance should obtain independent advice on state aid, assurance (sometimes inadvertent, but in the case of the Irish government, explicit) by an authority can cloud an organisation’s judgement of the level of risk involved.
As is clearly apparent from the Apple case, public authorities do sometimes get the analysis wrong. It is therefore critical for businesses and other organisations seeking aid, to ensure they have sat down with independent legal advisors and stepped through the state aid tests, so that they understand the risks of proceeding with any arrangement involving financial assistance from a public source.
As we have previously commented, whether the UK remains in the single market after it leaves the EU is the most important factor in whether or not state aid rules are likely to continue post-Brexit and we will continue to monitor the situation as it develops.
Stephens Scown can advise you on state aid issues on your project. Please contact Tim Lane if you would like to discuss further or contact us on 01872 265100.