What impact does de minimis state aid have on R&D tax credit claims?

De minimis state aid grants refers to a form of state aid provided by the government to businesses, but it is subject to a maximum allowable amount over a specific period of time. For this reason, it could have a significant impact on SMEs (small and medium sized enterprises).

This type of funding is often used in order to support business growth, innovation, investment and other commercial activities.

While it is recognised as a valuable source of financial assistance, businesses should be aware that receiving state aid can have implications for how R&D expenditure is treated when making a claim.

Historically, a company could not claim SME R&D tax credit relief for costs within a project that is funded by de minimis state aid. However, for accounting periods beginning on or after April 1, 2024, the UK government completely overhauled the system, meaning grant funding and state aid no longer restrict your R&D tax relief claims.

Therefore, it is important for businesses to keep accurate records of any grants, subsidies, or other forms of public funding received throughout the life of an R&D project. Understanding how a project has been funded can help ensure that any R&D tax relief claim is prepared correctly and in accordance with the relevant rules.

This is why we at Alexander Clifford always advise our clients to stay informed of how certain funding may affect their R&D claims, throughout the duration of their research and development activities.

Taking funding arrangements into account at an early stage can help businesses avoid complications later in the claims process. It can also provide greater certainty when forecasting the potential value of an R&D claim and assessing the overall financial support available for innovation projects.