Disallowance and penalties

Date published: 13 January, 2017

For recent changes to this guidance, please see the bottom of the page.

Our funding programme delivers more than £660 million annually in support to Scotland’s rural economy through Direct Payments and the Scottish Rural Development Programme.

In 2015, we made payments to more than 21,000 businesses and community groups. This funding maintains and creates many economic, environmental and social benefits, with a large number of people directly employed by these businesses.

And because the funding is all public money – coming from the European Commission and the Scottish Government – it’s important to make sure it’s being used in the correct way to protect the taxpayer.

To do this, the European Commission has various regulations, which are supported by Scottish legislation. If these rules aren’t followed, the Scottish Government can face fines.

This is called disallowance.

Payment of disallowance fines comes directly from the Scottish Government’s own funds, meaning taxpayers in Scotland ultimately bear the cost. So, to minimise the risk of being fined, the Scottish Government needs to make sure those receiving payments are complying with the regulations.

If we find you are not complying with regulations and relevant funding scheme rules and guidance, we may impose a penalty. This could mean losing some or all of any funding you have applied for or have already received from us.

European Commission regulations can relate to:

  • animal movement
  • animal health
  • crop and plant health
  • aid schemes
  • Cross Compliance

The level of disallowance for either significant over-claims by farmers or failures by us to enforce the rules could be 10 per cent of our entire rural payments budget.

You can find out more in our EU audit section.

An introduction to the EU audit process

To make sure the regulations and guidance is being followed, we carry out checks in our offices and on-site on a certain number of businesses that have claimed support.

If we discover that a business has not followed the terms and conditions of the funding scheme they are part of or have broken any European and Scottish regulations, we will call this a breach.

You can find out more in our inspections section.


The EU audit process covers all area of EU-funded expenditure and not just the Common Agricultural Policy (CAP).

You can find out more in our EU audit section.

An introduction to the EU audit process

Section Change
Introduction We've updated the business and community group payment information.