Identifying eligible clients in clothing manufacturing

Something we hear time and again from our clients is that they struggle to identify clients in their client base who would be eligible to claim R&D tax relief. So, in a new blog series, we’ll be digging into some less obvious sectors and discussing what to look for when assessing eligibility!

In the third part of this series, we’re looking at clothing manufacture. As with our previous subjects, the level of eligible R&D to be found in this area is misunderstood, and very often underestimated. If you know what you’re looking for, this can be a very productive area to focus on.

What to avoid

As with our previous subjects, it’s worth taking the time to first think about the types of clothing companies that don’t do any eligible work. The number one thing to avoid is companies that just produce clothes in response to changing fashions using established techniques – no matter how quickly they work to produce cheaper versions of catwalk fashions, there’s almost certainly no eligible R&D involved.

In a similar vein, overcoming logistical challenges in the production of these ‘fast-fashion’ items, such as sourcing suitable fabrics and identifying which factories can manufacture the items at the desired price and volumes, would not constitute eligible R&D. Essentially, this type of work does not advance any area of science or technology, so it’s out!

At the other end of the scale, clothing manufacturers that produce bespoke or couture items are no more likely to be doing eligible work – just because an item is a one-off or handmade does not mean that it requires any amount of R&D to be carried out.

Finally, in things to avoid, it’s worthwhile thinking about HMRC’s rules about using off-the-shelf materials to make new products. In a lot of clothing companies, they take off-the-shelf components – fabric, zips, buttons etc – and combine these into new and different items. HMRC are very clear on this not being qualifying work.

Ok, so what should I look for?

So, now that we know what ineligible clothing R&D work looks like, what areas should you be focussing on?

Responding to new legislative requirements

In common with the food and drink industry, there is a huge amount of legislation that textile manufacturers have to consider, especially around the requirements for flame resistance or fire retardancy. For clothing manufacturers attempting to make clothing for specialist applications, the need to make sure that their clothing complies with these legislations can involve eligible R&D.

Production of clothing for specialist applications

Following on from the above, the production of personal protective equipment and specialist clothing can be a great place to look for eligible R&D. Manufacturers of medical-grade clothing, or protective suits for fire crews or workers in nuclear power stations face a host of challenges that can only be overcome through extensive R&D work. For example, producing suits that shield the wearer from high levels of radiation whilst allowing a full range of movement is very difficult, and requires advances to be made in chemistry and engineering.

New manufacturing techniques

In your more average clothing manufacturer, there may be eligible R&D in the development of new manufacturing techniques. For example, the recent developments in laser stitching techniques has enables materials to be irreversibly fused in a quick and efficient manner. The development of this technique required advances to be made in laser physics, and would typically have qualified for R&D tax relief.

Tracking and delivery processes

Clothing manufacturers might be producing hundreds of different clothing items for multiple retailers simultaneously and tracking each individual item can be incredibly challenging. A lot of these manufacturers have in-house teams of software developers working on this complex software and hardware challenge, making advances, for example, in the area of radio-frequency tracking and big data processing. Working to identify which of your clothing clients has invested time and money into these types of software development projects will often pay off!