Designing for longevity: Sustainability as technical innovation in textiles
In this guide, we are looking to examine some of the core aspects of work in the textile sector that might constitute R&D for tax purposes.
Too often, the textile sector is overlooked as elaborate fashion displays mask the reality of the ingenuity that goes into developing clothing and accessories that are capable of keeping pace with modern life.
This results in too many businesses missing out on R&D tax relief and losing vital funds that could enhance their ability to innovate.
If you have any questions about the R&D work you conduct in the textile sector, be sure to speak to our team today!
What is meant by R&D for tax purposes?
Establishing a basic understanding of HMRC’s view of R&D when determining the eligibility of is important so that any work you do in the textile sector can be correctly appraised.
Is significant in the sector
Cannot be readily deduced by a competent professional Involves some degree of technical uncertainty
For R&D to be eligible for an R&D tax relief claim, it must seek an advance in science or technology that:
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Features work conducted during the financial year
What is likely to count as R&D in the textile sector?
Arguably more than in most sectors, working towards products that are simultaneously functional while being aesthetically pleasing is a core part of innovation in the textile sector.
The majority of the R&D conducted in the textile sector will centre around making designs and products more durable, more sustainable, more affordable and more environmentally friendly.
For too long, the textile sector has been plagued by practices that are now viewed as environmentally harmful and it is efforts to rectify this that will often lead to the most fruitful R&D tax relief claims.
However, the complexity of the work involved in the sector results in some nuances that are unlikely to be found elsewhere.
The biggest among these is how to handle aesthetic changes.
While these are generally excluded from R&D tax relief claims, the textile sector may be home to some of the few aesthetic projects that qualify as R&D.
When does work on aesthetics count as R&D?
In general, it does not, as aesthetics and marketability are forbidden by HMRC in the guidelines by which it determines the validity of R&D tax relief claims.
However, the history of the textile sector results in there being some degree of scientific and technological uncertainty around the implementation of different materials and processes to yield aesthetic results in a more sustainable fashion.
For example, if a shoe manufacturer changes from using artificial leather to real leather, it may no longer be possible to use the existing dyes that are a core part of the process.
If no solution exists on the market that would result in the same quality of colour while adhering to the sustainability parameters defined by the business, it may be necessary to develop a novel dye and dyeing process to achieve the desired results.
Previously, these results may have been achieved by using artificial chemicals that polluted the environment if the product were to end up in a landfill.
As such, finding a way to replicate the ease and convenience of artificial processes and materials using only environmentally sustainable materials would be considered an advance if it could replicate the previous result or improve upon it.
From an external perspective, this advance is centred around aesthetics, but the framing focuses on the science and technology required to make it possible.
Are more durable designs a part of R&D?
Responsible for about 10 per cent of global carbon emissions, fast fashion is rapidly becoming a key problem in the fight against climate change.
Cheaply made textiles that degrade rapidly and must be discarded are resulting in a saturation of landfills and require more production to keep pace with the rise in demand.
As such, a pivoting towards more durable designs that will allow a customer to keep using the same item for many years can be seen as a vital way of combating this climate crisis.
With the ongoing cost-of-living crisis, the expensive nature of high-quality textiles can often make them off-putting for customers who are struggling to make ends meet.
Poverty is expensive and the need to replace less durable items more frequently presents a financial burden for those with little disposable income.
As such, any business that can innovate solutions to durability issues that do not cause a sharp increase in cost to the end customer may also see their work count as R&D.
This is due to the need to find a way to source materials in a way that is both cost-effective and environmentally sustainable while maintaining that focus on durability.
Sometimes, the need to change entire manufacturing processes arises if the processes themselves are too costly to run.
Similarly, natural materials tend to present their own challenges regarding durability, as there is a greater degree of variance in quality when compared to artificial materials.
This can mean that what seems like a simple task of enhancing durability faces multiple scientific and technological uncertainties, resulting in plenty of scope for R&D work to be done.
Sustainability – the evergreen source of R&D
As there is ongoing concern that the planet may miss the targets required to prevent climate change from becoming inescapably catastrophic, working to make any sector more sustainable is a good avenue for R&D work.
The textile sector is no exception and has a great many instances where sustainability can be incorporated.
As previously mentioned, there is scope for reflecting on the materials used at every stage of the production process and considering the environmental impact of each one.
Can a product be considered environmentally sustainable when it uses natural fabrics but is bound together by adhesives that pollute the planet?
Dyes and finishes are often less sustainable, as artificial variants allow for a greater resilience to the chemical exposure of daily life that most textile items need to endure.
From hand sanitisers and perfumes to pollution and food substances, textiles are exposed to a wide range of contaminants that could all threaten the integrity of the design.
A bag that begins to peel and crack when exposed to chemicals in makeup is unlikely to gain wide appeal, as it will be seen as an inferior product to those already on the market.
As such, rigorous chemical testing is a key part of textile work and this can often result in R&D being necessary.
Where environmentally sustainable materials are used, it is important to try to enhance them with similarly sustainable chemicals and finishes so that the product can truly live up to its sustainable goals.
It is also necessary to consider the means of production when determining R&D.
A product is only as sustainable as the process by which it is made, so if the current manufacturing process relies on environmentally damaging practices, then some innovation is required to make changes.
Unlocking R&D in the production of textiles
R&D extends beyond the creation of a new product and can sometimes centre around developing innovative ways to achieve existing processes in a way that is significantly improved.
The notion of a significant improvement is the deciding factor as to whether innovation is considered a routine upgrade or if it counts as true R&D.
This will place the focus on whether the competent professional responsible for overseeing the R&D can readily deduce how to improve the production process to achieve the desired outcome.
It should also be noted that importing a system from another sector might be novel for your business but is unlikely to count as R&D if there was not scientific or technological uncertainty around its implementation.
Some key aspects of R&D may focus on efficiency, cost-reduction or incorporating more sustainable practices.
Developing bespoke parts for CNC machines might be required to allow sustainable materials to be incorporated into the production of textile products without damaging them in the process.
This is due to them having different resistances and durability than the materials that may have been used previously.
It might therefore not be apparent how to swap an artificial fabric for a natural one without damaging the machines or the product.
There may also be challenges around the utilisation of different sustainable materials that can only be resolved by innovating new production processes.
What is meant by consumables in R&D?
Any consumable item that cannot be used in the final product could be considered eligible for inclusion in an R&D tax relief claim.
This is measured by whether the item was destroyed or irreparably altered by the R&D work and therefore cannot be sold on for commercial gain.
For the textile sector, any fabrics or other materials that have been irreversible damaged in the R&D work can be included in an R&D tax relief claim provided their destruction was part of a legitimate attempt to resolve the advance.
For instance, natural leather may react badly to a new chemical treatment and be unusable in any future product and the cost of this could be included in a claim.
Similarly, a dye could wash away when applied to a material and the materials used to create it could be considered eligible.
If you are able to recycle any materials from failed tests and use them in final products, these cannot be claimed as part of the R&D tax relief claim.
If possible, it might still be worth trying to reuse materials where possible, as discarding them purely for the sake of an R&D tax relief claim is environmentally irresponsible and also not how consumable costs are calculated.
How can R&D tax relief claims in
If the project was successful, what resulted in its success?
Finding the value of R&D tax relief claims in the textile sector
We know that R&D can be found in most sectors, which is why we are looking to expand awareness.
Textiles form such a core part of our daily lives that it is only natural that they are a hotbed of innovation.
The companies that are working to revolutionise the textile sector need to be rewarded for their work and R&D tax reliefs are an excellent way to achieve this.
We work closely with innovative businesses and accountants to increase compliance with R&D tax relief claims.
All claims we submit are 100 per cent eligible and we always strive to maximise the relief claimed in each one.
If HMRC do launch an enquiry into any claim we submit, we will defend that claim so that not a penny of eligible expenditure is lost.
To find out whether you are eligible for an R&D tax relief claim, be sure to speak to our team today!
