Research and innovation are an inherent part of forward thinking fashion. If you think about sustainability movements and various advancements made in the textile and clothing industry in the last ten years you’ll discover several revolutionary ideas that qualify for R&D.
Whether you’re developing, testing, or repurposing materials, if your business is finding new and innovative ways to find a solution for a problem in your field you may be eligible for R&D tax credits. But here’s the catch, R&D legislation will be seeing some changes by April 2020 and we want you to be prepared for the upcoming rules altering.
How it may impact on fashion entrepreneurs:
For those working in fashion, you might check most of the boxes in terms of location, research and eligible activities, but how many of you can afford a studio filled with full-time permanent staff? This is where the new rules will prove difficult.
Don’t be distraught if the upcoming changes will affect your relief or, if you discover your endeavours don’t qualify because there are other solutions to consider:
If your start-up has the financial backing to hire permanent staff instead of subcontracting to external resources then you should definitely consider doing this. Alternatively, if you heavily rely on subcontractors, you may want to consider making the best use of their R&D work prior to the April deadline to ensure you receive full relief for their involvement.
It’s not unusual for directors to pay themselves a small salary and offset the balance of their pay by the way of dividends. If your fashion business has a director it may be worth considering a slight increase to their pay which would result in an additional PAYE liability. If you think this might be a possibility, it’s important that you discuss the pros and cons with your business advisor.
As a start-up in the fashion industry, we wouldn’t be surprised to hear that you would love to hire staff but really just don’t have the funds to do it yet. For many creative entrepreneurs they often work solo, or search for help outside the business, this means no one is on the payroll to claim R&D tax relief. So what’s plan B? You can work with a business advisor and look into other sources of funding such as: Crowdfunding; Bank loans; Venture Capital; Investors; Family & friends.
One of the best ways to prepare yourself for the upcoming changes or to explore further into your eligibility for R&D tax relief is to speak with a professional. Wellers can work with you to explore your understanding of Research and Development, as well as the pending legislation changes. Your advisor can help you identify relevant work you’ve undertaken to evaluate your eligibility for a potential claim and also work with you on your business plan and strategy for the next phase of growth.
To read the full report please click here: Changes to R&D Legislation
If you have any questions or comments, we’d love to hear from you, firstname.lastname@example.org.
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