Quick answer: Notified state aid is government support formally notified to and approved by the European Commission, or the UK subsidy control regime since 4 January 2023. Most Innovate UK Smart Grants were historically classed this way. It blocked SME R&D relief under the old scheme, but is less critical under the merged scheme from 1 April 2024.
What is notified state aid?
Notified state aid is government support that has been formally notified to and approved by the European Commission under EU state aid rules, or equivalently under the UK subsidy control regime that replaced them from 4 January 2023. Most Innovate UK Smart Grants were historically classed as notified state aid. The classification was material under the old SME R&D scheme, where receipt of notified state aid on a project blocked the SME claim and forced RDEC treatment. Under the merged scheme from 1 April 2024 the concept is less critical for R&D purposes but still relevant for subsidy accounting.
How does HMRC define notified state aid?
HMRC guidance on notified state aid in the R&D context is at CIRD81680 of the CIRD Manual. The UK subsidy control framework is in the Subsidy Control Act 2022 and administered by the Competition and Markets Authority's Subsidy Advice Unit. Interaction with R&D relief is covered at CIRD81670 and CIRD90300 for the merged scheme.
What does notified state aid look like in practice?
A company receives a grant of £150,000 from an Innovate UK competition that is documented as notified state aid. Under the old SME scheme, this would have blocked the SME claim on the entire project. Under the merged scheme for periods from 1 April 2024, the company's claim proceeds with the subsidised portion of expenditure treated under the simplified subsidised-expenditure rules. Use the free eligibility calculator to check how a grant with notified state aid status might affect your specific claim.
Related terms
Frequently Asked Questions
Notified state aid is government support that has been formally notified to and approved by the European Commission under EU state aid rules, or equivalently under the UK subsidy control regime that replaced them from 4 January 2023.
No, not in the way it used to. Under the old SME scheme, receipt of notified state aid on a project blocked the SME claim and forced RDEC treatment. Under the merged scheme from 1 April 2024 the concept is less critical for R&D purposes, though it is still relevant for subsidy accounting.
Most Innovate UK Smart Grants were historically classed as notified state aid. The UK subsidy control framework is set out in the Subsidy Control Act 2022 and administered by the Competition and Markets Authority’s Subsidy Advice Unit.
Under the EU state aid rules that applied before the merged scheme, a company generally could not receive more than one form of notified state aid for the same project. Because the old SME R&D scheme was itself classed as notified state aid, a project that also received a notified-state-aid grant had to be claimed under RDEC instead of the more generous SME scheme, even for the SME's own unfunded spend on that project.
Yes, in a more limited way. The Subsidy Control Act 2022 replaced the EU state aid cumulation rules from 4 January 2023, and R&D tax relief itself is not treated as a notifiable subsidy requiring pre-approval, but very large grants can still trigger subsidy control considerations that should be checked case by case.
Not automatically. Under the merged scheme, expenditure is only treated as subsidised to the extent it is actually met by a grant or other funding; unfunded spend on the same project is not treated as subsidised. This differs from the old SME/notified-state-aid interaction, which could push an entire project's spend out of the SME scheme, not just the grant-funded portion.