How Invennt realised that project management was the Rosetta Stone connecting the fashion and the construction industries.
One of our clients gave us a referral to a fashion client, and we asked ourselves other than knowing about R&D tax credits, what else is it that we can bring to the fashion sector?
Invennt has worked extensively with construction clients until 2020 when one of our clients asked Invennt’s co-founder, Tim Fitch, if his wife’s fashion business could make an R&D claim. Invennt took this on under two parts; first of all, we understand the tax code very well as we have been doing R&D claims for many years and we have a large portfolio of clients in the construction sector.
Secondly, we have a process that we have developed and refined over the years that uncovers R&D activity and has been proven highly successful in recovering serious money. Money which our clients did not realise they were owed. We help people who are, in effect, developing IP and solving complex problems but who also do not realise that some of what they do is classed as R&D by HMRC. The Invennt process has been designed to reclaim this cash with a minimum amount of effort from our clients perspective. We do all the heavy lifting.
When the opportunity to talk to the fashion industry presented itself, Tim felt certain that we had a process that worked. But the question was; could it be applied in the same way to the fashion sector?
What Fashion and Construction Have in Common
Construction is a project-orientated industry, and therefore businesses within the construction sector are focused on projects. As businesses get bigger, they start doing more than one project at a time, and of course, you get very large businesses that may have many projects which may have a certain amount of inter-relatedness. We call these ‘programmes of projects’.
Fashion is another project-orientated industry. It’s a very fast-paced industry that works on seasonal collections, with each season lasting 3-4 months before you’re on to designing and developing the next season. If you’re a fashion house and you’re designing a collection, that collection would possibly have hundreds of garments of all different varieties, and you can’t complete the collection until those have been designed and developed.
Each element or garment within a particular collection has to work functionally as well as achieving the desired aesthetic. The garment and collection of the seasonal line have to both fulfil the designer’s vision and be wearable, washable and a degree of resilience.
This is when the light bulb went off for Tim that there are surprising similarities between the fashion industry and the construction industry. This is when Tim realised that the management of projects was the Rosetta Stone that connected the construction and fashion industries. You see developing an individual garment within a collection is a project and a collection is a group of inter-related garments (or projects).
The construction and fashion sectors are both very different in terms of the actuality of those projects which they manage, but conceptually they are similar. As soon as that lightbulb went off, Tim could see how Invennt’s processes and methods could work, and the only bit missing from our team was some of the technical know-how.
Invennt’s Fashion Experts
The technical know-how, when coupled with everything else, was easy for our team to back-fill. Last year we sought out a fashion industry expert and employed them as a part of our team.
We are thrilled to say that we now not only have the experience of successful fashion R&D claims under our belt, but we also have a fantastic partner who inputs on the technical elements of garment manufacturing. Invennt also have our own in-house enthusiasts and experts who are very motivated to make this work and have got an eye for fashion.
This is how Invennt have gone from construction to fashion and how we were able to translate our expertise in one sector into another. We innovatively transferred successful methodologies because, in terms of the framework between the two sectors, they’re remarkably similar. The key difference is the technology involved, although we’ve found that with the right partner we have the know-how of the technology and are as confident in the fashion sector as we are in the construction sector.
What does a successful R&D claim look like in the fashion sector?
If you’re talking to a design house that creates very high-end haute couture, the R&D is focused on the development of effectively the cat-walk garment itself and making that work. It’s not so much the aesthetic design, but it’s all of the work that goes into taking the concept of the cat-walk garment and transforming it into the reality of an everyday wearable piece.
To do that, there’s a lot of focus on the material technology, the printing, painting on fabrics, weaving, special fabrics that have been produced so they hold their shape etc. All of the ways that fashion is created falls under research and development as defined in the tax code.
What we are finding is that the fashion industry is a bit like construction, where 6-7 years ago, people didn’t think they were supplying R&D to their industry in the sense that falls under that tax code, however, it’s a major role in the day to day workings of all fashion. In the same way that we were able to transform the construction industry’s idea of what they do daily as R&D, we are now opening that flash of inspiration towards the fashion industry.
Because we know the tax code and know that we have a process that works, we’ve made this conceptual leap that the project-orientated nature of industry lends itself to R&D activity, and the great thing with fashion is that it repeats itself every year. It doesn’t matter how many collections you do per year, there is always going to be a new collection coming.
So regardless of whether you’re doing one collection a year or 6, this activity is ongoing because that’s the nature of the industry.
How often can businesses in the fashion industry claim R&D?
The fashion sector has the same rules that apply to the construction sector and virtually every other sector. You can claim every year that you submit your corporate tax return, your CT600. Typically what happens is you submit your CT600 and after we have completed our work, you can update it, which assuming there is an R&D claim there, will reduce your corporate tax bill.
Can R&D claims be backdated in the fashion sector?
Yes, you can backdate 2 financial years, meaning if your financial year-end is March, and you’re reading this in 2021, you can claim for years 2020 and 2021 combined.
What that means is that we write a report for those two years, we calculate what’s called the ‘qualifying costs’ for each year and then all our client needs to do is re-submit their corporate tax return, adjusting two boxes with the numbers that we’ve supplied you.
All in all, that takes our client about 10-15 minutes per year. You simply upload it and attach the PDF copy of the R&D report that we’ve drawn up for you by our team of experts. HMRC are doing quite well at the moment with faster turnarounds and you should get your tax credit back in 5-6 weeks.
Written by Sarah Hall
If this blog sounds familiar to your business, download the executive briefing or book an exploratory review.