The federal and provincial governments have been encouraging people to join the trades in the last few years, and through the apprenticeship programs they have given employers who hire apprentices credits. This has allowed employers to bring on apprentices and have help with paying their wages. This is another great way to help small businesses that are the main employers in most provinces in Canada.
Apprenticeship Job Creation Tax Credit (AJCTC)
The AJCTC is a non-refundable tax credit equal to 10% of the eligible salaries and wages payable to eligible apprentices in respect of employment after May 1, 2006. The maximum credit an employer can claim is $2,000 per year for each eligible apprentice. If your business hires an “eligible apprentice”, you qualify to claim the credit.
An “eligible apprentice” is someone who is working in a prescribed trade in the first two years of their apprenticeship contract. This contract must be registered with a federal, provincial or territorial government under an apprenticeship program designed to certify or license individuals in the trade. A prescribed trade includes the trades currently listed as Red Seal Trades. The Red Seal Program is recognized as the interprovincial standard of excellence in the skilled trades.
If you are an employer, you will be able to claim the credit on your Individual Income Tax Return, on line 412 – Investment tax credit, by filing Form T2038(IND), Investment Tax Credit (Individuals). In addition, any unused credit may be carried back 3 years and carried forward 20 years. When two or more related employers employ the same apprentice, special rules apply to ensure that the $2,000 limit is allocated to only one employer.
Hiring Credit for Small Business (HCSB)
While this credit applies to all employees you hire, I thought I’d mention it as its one people forget about. The HCSB stimulates new employment and supports small businesses, while providing relief from the employer’s share of employment insurance (EI) premiums by crediting up to $1,000 on their payroll account. As of August 2, 2013, over $209 million has been credited to over 549,000 eligible employers.
Basically you get the difference between your EI premiums from one year to the next, up to a maximum of $1,000. For example, in 2012 you paid $1,329 in EI Premiums and in 2013 you paid $1,799 you would get a credit of $470 in 2014, which you can use to reduce your current payroll remittance.
Each province or territory also has it’s own credits for employers of apprentices. You should check with Canada Revenue Agency and your provincial apprenticeship authority to see what’s available.
In British Columbia there is the British Columbia Training Tax Credit (Employers), which you file with form T1014. Complete this form to calculate your British Columbia training tax credit for employers. If you are completing the tax return for a corporation, use Schedule 428, British Columbia Training Tax Credit, of the T2 return.
You can claim this credit if you were a resident of British Columbia at the end of the year and you met the following conditions:
• You carried on a business in British Columbia at any time in the year; and
• You employed a person who was registered in an eligible program administered through the British Columbia Industry Training Authority (ITA) at any time in the year.
There are three elements to the training tax credit:
• Basic tax credit for an eligible recognized program (non-Red Seal) (read Part 2 of the worksheet);
• Completion tax credit for an eligible training program (Red Seal and non-Red Seal) (read Part 3 of the worksheet); and
• Enhanced tax credit for First Nations individuals and persons with disabilities (read Part 4 of the worksheet).
If you are an employer who will be hiring apprentices, you’ll be glad to know there are credits available to you for hiring and training your workforce. Government has come to realize that it needs to incentivize employers to bring on and train new employees. Let’s face it, it can be very expensive to hire and train a workforce, and it’s nice to see your efforts are being recognized.