Which UK subsidy control rules set match funding on a grant budget?

What to take away

What the Subsidy Control Act 2022 means for a grant budget

The Subsidy Control Act 2022 is the statute that governs financial assistance given by public bodies in the United Kingdom. It replaced the EU state aid regime that applied before Brexit. Any grant, loan, guarantee or tax relief that gives a business a selective advantage is a subsidy under the Act.

The Act matters to your budget because it constrains what a public body can offer you. A council, combined authority, Innovate UK or Scottish Enterprise cannot simply hand out whatever it likes. It must satisfy the subsidy control principles, keep records, and publish information about awards above certain thresholds.

The Department for Business and Trade - GOV.UK leads on subsidy control policy and the guidance that sits under the Act.

The Act also removed the old block exemption culture. Under state aid, schemes such as the General Block Exemption Regulation let bodies grant aid without notifying anyone.

The replacement is a principles-based system, so the analysis is done by the granting body, not by a central approver. That shifts the burden of getting match funding and eligible costs right onto the public body and, indirectly, onto you.

For a finance lead, the practical effect is that grant budgets are now built around two things: the total subsidy you have already received, and the specific rules in the offer letter. The Act does not publish a single match funding rate. It sets the boundaries within which a body chooses its rate.

The subsidy control principles and how public bodies apply them

The subsidy control principles are set out in section 12 of the Subsidy Control Act 2022. There are seven of them.

In practice, a public body must show that a grant pursues a public objective, is proportionate, avoids unnecessary distortion of competition, and does not simply move activity from one part of the UK to another.

The principles also require that the subsidy is designed to change the behaviour of the recipient. A grant that pays for something you would have done anyway fails that test. This is why offer letters ask what the project would look like without public money, and why match funding is treated as evidence of your own commitment.

A public body applies the principles before it publishes a grant scheme and again when it assesses your application. It records a reasoning trail: the objective, the counterfactual, the level of assistance, and why a lower amount would not work.

The plain-English explanation of the Act's rules covers these duties and the tests that sit alongside them.

The principles do not dictate a match funding percentage. They dictate that the percentage must be justified. A 100% grant for a commercial project is hard to justify because it removes your own risk. A 50% grant with a clear market failure is easier to defend.

If you are new to publicly funded projects, the rules and ethics from application to award are a good starting point.

Minimal financial assistance thresholds and when they are used

Minimal financial assistance is the UK replacement for de minimis aid. It allows a public body to give small amounts of subsidy without applying the full subsidy control principles. The threshold is £315,000 per business over a rolling three-year period. This covers all minimal financial assistance received from any UK public body.

The threshold is a cumulative cap, not an annual allowance. If you received £200,000 in minimal financial assistance last year and apply for £150,000 now, the new award breaches the cap. You must count awards from central government, devolved administrations, local councils and any other public body.

Minimal financial assistance is used most often for small grants, business support vouchers, and start-up funding. It is popular because it is quick: the public body does not need to run the full principles assessment. It still needs a written record and a declaration from you about previous assistance.

There are separate thresholds for certain sectors and for services of public economic interest, and the detailed subsidy rules in the Act's schedules set out how those are applied.

If your grant sits above the minimal financial assistance cap, the public body must apply the full principles and may need to publish the award on the subsidy database.

How match funding percentages are set on a grant offer

Match funding percentages are set by the public body, not by the Act. The body chooses a rate that reflects the project, the region, the size of your business and the risk it is taking. Common rates run from 20% to 70% of eligible costs, with the public body paying the rest.

The rate usually rises for smaller businesses and for projects in areas with weaker private investment. A pre-revenue firm in West Midlands may see a higher intervention rate than a large manufacturer in the South East. Devolved bodies such as Scottish Enterprise, Business Wales and Invest NI often publish their own intervention rates for their programmes.

Match funding can be cash or, in some schemes, in-kind. Cash is simpler and more likely to be accepted. In-kind contributions such as unpaid director time or use of existing equipment are sometimes allowed, but they must be valued and evidenced. Most public bodies prefer cash because it is easier to audit.

The offer letter is the document that fixes the percentage. It will state the total project cost, the grant amount, the match funding percentage and the eligible cost categories. If the letter is silent on a cost, treat it as ineligible until the body confirms otherwise in writing.

A grant budget template built around match funding and monthly cash helps you see the gap before you sign.

Your own match must be secured, not aspirational. A bank facility that is not drawn, or a director's loan that is not documented, will usually fail verification. If your match includes your own cash, keep it in a separate account so the public body can see it.

Eligible cost rules and what a public body can and cannot fund

Eligible cost rules are the list of costs that count towards the grant and the match. They are set by the public body and vary by scheme. The rules decide whether your match funding is real or theoretical, because only eligible costs can be matched.

Typical eligible costs include staff salaries for time spent on the project, contractor fees, software licences, equipment, and travel directly related to the project. Typical ineligible costs include irrecoverable VAT where you can reclaim it, land and buildings, routine maintenance, and costs incurred before the offer date.

VAT is the most common trap. If you are VAT registered and can recover VAT, the public body will usually fund the net cost. If you cannot recover it, the gross cost may be eligible. This changes your match funding maths, so check your VAT position before you build the budget.

A guide to costs, VAT and cash flow is worth reading before you submit.

There are also rules on procurement and the state aid replacement. If you buy equipment with grant money, you may need to follow the public body's procurement thresholds. If the grant is given under minimal financial assistance, you must declare it on future applications.

Records and transparency obligations after a grant is awarded

Public body transparency duties require the granting body to publish information about subsidies. The main route is the UK subsidy database, which is maintained under the Act. Awards above the minimal financial assistance threshold are published, usually within a set period after the award is made.

The database entry includes the recipient's name, the amount, the granting body, the date and the policy objective. This means your grant can be visible to competitors, journalists and other public bodies. It also means you cannot quietly receive a second award that breaches a cap.

Your own record-keeping duties run alongside. You must keep evidence of eligible costs, match funding, procurement and project delivery for the period stated in the offer letter, often three to six years. Auditors can ask for this after the project ends.

If your circumstances change, tell the public body. A change of ownership, a move to a different region, or a decision to stop the project can affect the grant. Failure to report can lead to clawback. The wider set of obligations, from subsidy control to advertising, is worth checking before you accept an offer.

Transparency also cuts the other way. Before you apply, you can search the database to see what similar businesses have received. That helps you benchmark your match funding request and avoid a cap breach.

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