In recent years, the Clothing, Textiles and Fabrics industry has come under a lot of scrutiny due to the negative impact on the environment from some segments; many deem this to be the result of the ‘fast fashion’ trend, where consumers looks to purchase stylish clothing frequently and at an affordable price.
Conversely, there is another side to the industry, where customers look for garments with specific technical properties and are less concerned with volume purchases or price. Instead, they seek a high degree of functionality; waterproofing, durability, heat or cold resistance and flexibility name but a few of the functions generally sought in performance clothing. With consumer expectations rising year on year, innovation into such garments is prevalent throughout the industry.
The combination of scrutiny and evolving consumer demands has forced companies across the industry to innovate by keeping production costs to a minimum, whilst simultaneously ensuring environmentally friendly, functional products are consistently developed.
Despite this, the industry is often overlooked when it comes to R&D tax credits. Many businesses think they need to be developing the biggest thing since Gore-Tex or inventing garments comprised completely of technical fabrics to be eligible to recover their R&D costs. Although these activities obviously qualify, there is loads of less obvious stuff which also qualifies under HMRC’s intricate mechanism.
In reality, there are countless activities which entitle you to recover your costs and this is the case regardless of which part of the supply chain you are in. Whether you are a designer, pattern cutter, manufacturer or fabric mill, you may be undertaking qualifying activities. A few examples of what HMRC would consider R&D include:
- Developing new materials, fabrics and textiles to achieve specific properties; for example, high degrees of temperature resistance or flexibility
- Adapting existing materials or fabrics for a new purpose
- Integrating existing materials and components (like zips) to create a new, functional garment
- Developing new production processes to improve your output, or reduce waste and carbon footprint of your operations
- Implementing software systems to improve your back office operations by reducing human input through automation
- Trialing new combinations of materials
Even if these activities are being carried out overseas, as is often the case in the industry, providing the costs are incurred by a UK Limited company, they are eligible. Unfortunately this is at a slightly lower rate of recovery, which is where the mechanism can start to get a little complicated, but a good R&D consultancy would be happy to guide you through these intricacies.
If you are in the clothing, textiles and fabrics industry, hopefully this post has helped you realise there is a good chance some aspect of your business activities will qualify you to recover costs through the R&D scheme. If you’re wondering if you’re eligible, feel free to contact either myself or one of my colleagues. Between us we have submitted numerous applications for the sector, with exclusively 5* rated reviews from our clients, so you know you’ll be in safe hands
