Chapter CIRD81670
| Published date | 11 March 2016 |
| Record Number | CIRD81670 |
| Court | HM Revenue & Customs |
| Issuer | HM Revenue & Customs |
As a signatory of the European Community Treaty, the Government is subject to the European rules on State Aid. The EC has considerable powers to monitor, control and restrict the level of aid given by all Member States to their industries. But broadly speaking the Commission may intervene when they consider that a measure is provided through State Resources, favours certain undertakings or the production of certain goods, relates to an activity that is tradable between member states, and the measure distorts, or has the power to distort competition.
There are certain circumstances where the strict rules are modified, and one of these is related to the promotion of R&D. But there remain ceilings as to how much State Aid can be provided, and there is a different treatment for SMEs than there is for large companies. This is reflected in the fact that we have two different regimes for these sorts of entities.
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Effect of notified State Aid rules on the SME R&D tax reliefA notified State aid is a State aid that has been notified to, and approved by, the European Commission. Notified State aids include:
- Government funded grants schemes (e.g. the Smart grant (previously the Grant for Research and Development)). Not all government grants are necessarily State aids, and funding under some schemes may or may not be State aid depending on the circumstances. Given the number of different schemes available and the fact that schemes and their names change, HMRC is not able to give specific guidance on which grants are State aids. If your company receives, or may receive, a grant you should consult the scheme/ grant provider about this.
The SME R&D tax relief scheme
If a company is in receipt of a notifiable State aid for an R&D project it cannot claim any other State aids. This is to avoid the company receiving more State Aid than is permitted under the State Aid cumulation rules.
If excess aid were received this could be ‘clawed back’ by the EU, and the company could also be charged interest on the aid received.
A company that has received a grant or other form of support which is notified state aid for a project cannot subsequently repay this support in order to claim R&D relief. See the legislative test in CTA09/S1138 as to whether a notified state aid is, or has been, obtained.
General measures that are not restricted to a specific group are not notified State aid. These include:
- the Large company R&D tax credit scheme (for...
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