Definition
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 HMRC defines it
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.
Practical example
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.