Definition
Under EU state aid rules that applied to the UK before the end of the transition period on 31 December 2020, de minimis aid was support below EUR 200,000 over a rolling three-year period. Aid below this threshold was exempt from the notification requirement because its effect on competition was deemed negligible. For R&D purposes, the relevant Regulation was Commission Regulation (EU) No 1407/2013 on de minimis aid.
The legacy SME R&D scheme was notified as state aid rather than de minimis aid, which is why Innovate UK grants and other notified state aid could affect the qualifying base: two forms of notified aid cannot be stacked on the same costs. De minimis aid from other sources, by contrast, generally did not reduce the SME R&D claim in the same way. HMRC's guidance at CIRD89000 addressed the interaction.
Relevance after 1 April 2024
The merged scheme and ERIS, which apply from 1 April 2024, are not structured as EU state aid schemes because the UK left the EU. The de minimis framework therefore has no direct application to merged-scheme claims. However, it remains relevant in two scenarios.
First, straddling periods that span 1 April 2024 contain a pre-change slice assessed under the old rules, where the state aid interaction may still be relevant. Second, legacy claims for periods ending before 1 April 2024 that remain open in enquiry are still governed by the old rules, including the distinction between notified state aid and de minimis aid.
How the distinction mattered
Under the legacy SME scheme, expenditure that was funded by a notified state aid grant was treated as subsidised expenditure and could not attract the SME uplift. Only the RDEC credit (at 13%, then 20%) was available on that portion. De minimis aid did not carry the same restriction, meaning a company receiving small grants structured as de minimis could in some cases still claim the full SME enhancement on the related costs.
Common mistakes
The most common mistake in legacy claims is assuming all grant funding is treated the same. A grant structured as de minimis aid had a different effect on the claim calculation compared to a grant that was notified state aid. Incorrectly categorising an Innovate UK grant or a local authority business support grant could lead to over- or under-claiming on the legacy scheme.
A second mistake is assuming the de minimis framework applies to merged-scheme claims. It does not. If your accounting period is entirely after 1 April 2024 and you are on the merged scheme, the state aid distinction is not relevant to your claim calculation. For the interaction of grants with the merged scheme, a different set of rules applies.