For those not well versed in the textile industry, there is a tendency to imagine only the work that goes into making clothing and accessories fashionable and appealing to the consumer.
While that is certainly a part of the work involved, such a reductionist view overlooks the sheer wealth of R&D work that goes into making the textile sector compatible with modern technology and sensibilities.
One of the great battlegrounds of innovation that is currently being waged across many sectors is the push for more environmentally sustainable practices.
The textile industry is deeply engaged with this process and the bulk of the work conducted to pursue this goal is likely to qualify for R&D tax relief credits.
Why is environmentalism a source of R&D in the textile industry?
The development of textiles involves a process that combines science and engineering to ensure that not only the products themselves are suitable for use but that the process by which they are created is effective and efficient.
Within these processes, a number of important developments have shaped the growth of the textile industry.
Where once entirely natural materials were used to make clothing and other textile products, the development of more synthetic substances resulted in more freedom and durability with designs.
Consumers have come to expect a certain degree of quality and longevity from any textile item they now purchase and this can be problematic if the mechanisms by which that quality was achieved have now been found to be hazardous for the environment.
This has been the case for many textile businesses that have found that the resins, dyes and materials used in their designs are causing harm to the environment.
In many cases, these offending substances remain the cheapest and easiest way to achieve the desired result, which leaves textile businesses in a difficult position of having to choose between knowingly polluting the environment or producing either inferior or more expensive products.
R&D is a way out of that predicament, as it may facilitate the creation of environmentally sustainable textiles that can be produced in a comparable, inexpensive manner compared to their unsustainable counterparts.
However, the innovation is not as simple as exchanging synthetic materials and resins for naturally occurring ones.
Chemical science often comes into play in the textile industry as textiles need to be able to endure exposure to a range of contaminants, including pollen, dust, and the chemicals found in perfumes and hand sanitisers.
There is also the question of how malleable naturally occurring materials are compared to their synthetic counterparts.
Natural leather might be more sustainable, for instance, than synthetic leather, but it has a greater tendency to split or crack when subject to intense manipulation.
This is a problem for materials that will form part of a larger whole, such as being part of a handle on a handbag.
How should environmental concerns be handled in R&D tax relief claims?
Striving to make a product or process more environmentally sustainable is something that HMRC generally recognises as valid R&D.
The main challenges are likely to arise from the fact that it is originating from a niche sector wherein HMRC are more used to seeing ineligible claims centred around routine or trivial advances rather than anything more substantive.
As such, it is vital that only the scientific or technological uncertainty and the work conducted to resolve it are included in the R&D tax relief claim.
Any work to improve the aesthetic or commercial viability of the product should be excluded unless it is a rare occurrence, wherein it can be deemed part of the advance.
An example of this might be the development of a natural, sustainable dye that performs the same or better than an unsustainable artificial dye, wherein the development of the dye could not be readily deduced by a competent professional.
While dyeing a product technically centres around the aesthetics, the development of the dye would constitute R&D if it was not clear how it would be achieved using the materials and processes decided upon by the competent professional.
It would also be necessary to justify why those particular processes or materials were selected over the host of other naturally occurring substances that theoretically could achieve the advance – this is where centring on ease of supply or cost could be a valid concern, as an advance is less impressive if it is not replicable.
How can I support an R&D tax relief claim in the textile industry?
We are working with innovative businesses operating in a range of niche sectors to ensure that the unfamiliarity with HMRC does not act as a barrier to innovation.
We can discuss the projects that are likely to qualify and help you understand your qualifying expenditure.
It is worth remembering that R&D tax relief claims have historically been beset by bad actors looking to erroneously claim funds to which they are not entitled.
In response, HMRC have introduced the Mandatory Random Enquiry Programme (MREP) to go alongside the traditional review process that could see your R&D tax relief claim met with additional scrutiny.
We defend any eligible claim from enquiries, but this is aided by evidence provided by innovative businesses like yours.
