The federal Apprenticeship Job Creation Tax Credit (AJCTC) allows employers to claim 10% (up to a maximum of $2000) of eligible salaries and wages paid to employed apprentices who are registered in a Red Seal trades program. This includes the Cook and Baker trades.
The credit applies to employees registered as apprentices from May 1, 2006 onwards who meet program eligibility criteria. Specifically, an eligible apprentice must: a) be working for you in a prescribed trade in the first two years of their apprenticeship contract, and b) be registered with the Industry Training Authority (ITA).
Eligible salaries and wages are those paid to an apprentice during levels one and two of the apprenticeship training. The credit is based on the time worked during the tax year and is not dependent upon the apprentice completing a level of training. Any compensation based on profits, bonuses, and taxable benefits including stock options and other unpaid remuneration is excluded. The maximum allowable credit is $2000 per apprentice. Special rules may apply where the apprentice has more than one employer.
Qualifying employers can claim the AJCTC on their income tax returns (Form T2038(IND), Investment Tax Credit – Individuals or Form T2SCH31, Investment Tax Credit – Corporations). These can be ordered online or by calling 1-800-959-2221.
For more information see: Canada Revenue Agency - Apprenticeship Job Creation Tax Credit
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.
Who is an "eligible apprentice"? 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 49 trades currently listed as Red Seal Trades. For more information, see the Interprovincial Standards Red Seal Program.
How to claim? 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 three 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.
Information for Employers of Apprentices Regarding Federal Programs and Initiatives
Employment Insurance Benefits - One of the biggest causes of delay in Employment Insurance (EI) payments to apprentices is the delay in receiving the Record of Employment (ROE), or the ROE is received with errors that require follow up with the employer. As an employer, you can reduce these delays by:
- Ensuring the correct reason for separation code is used on the ROE. For apprentices who are returning to your company after completing technical training, the correct Code to use is “J” (apprentice). Code “C” (return to school) should only be used if the apprentice has resigned his position and will not be returning to your company on the completion of technical training.
- If an apprentice will not be returning to your company after completing technical training due to a shortage of work, Code “A” (shortage of work) should be used. This will allow the apprentice’s claim for EI benefits to continue without delay once the technical training is completed.
- Using the WEB ROE website for the issuance of ROE’s. WEB ROE assists employers by identifying errors that need to be corrected before submitting the ROE, and also submits the ROE directly to Service Canada. This helps to speed up payment to your apprentices.
More information on WEB ROE is available by clicking here or call 1-800-770-7910.
Supplemental Unemployment Benefit (SUB)
Employers use SUB plans to increase the employee’s weekly earnings during periods of unemployment. Payments from registered plans are not deducted from the employee’s EI benefits. For more information on SUB plans for Apprentices call 1-800-561-7923 or go online by clicking here.