As government, industry and educational institutions scramble to fill the gap by encouraging more young people to enter the trades, businesses are being supported by recent tax measures that can help defray the costs of their apprenticeship training programs.

Financial Support for Apprenticeship Training

If your business hires eligible apprentices, you may be able to claim a federal tax credit on their wages and salaries.

The apprenticeship job creation tax credit (AJCTC) is a non-refundable tax credit equal to 10% of the eligible salaries and wages payable to an eligible apprentice in respect of employment after May 1, 2006. The maximum credit is $2,000 per year for each eligible apprentice based on a salary of at least $20,000. Special rules apply to ensure that the $2,000 limit is allocated to only one employer in a related group.

In addition, your province or territory may also offer additional per apprentice tax credits over the period of the apprenticeship.

Eligible Apprentices

For purposes of the AJCTC, 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.

Prescribed Trades

A prescribed trade includes those listed as Red Seal Trades, which currently includes 49 eligible apprenticeships, but may include additional trades the government feels should qualify for the credit. To access a listing of the trades that are designated Red Seal for each province and territory, visit the website of the Interprovincial Standards Red Seal Program at www.red-seal.ca.

The site details the essential skills that the apprentice is required to obtain under each apprentice program, for example automotive painter, carpenter, cook, electronics technician, industrial electrician, etc. These profiles can help you determine whether existing openings within the business will be able to provide the requisite training for a budding apprentice. For companies that currently have apprenticeships in place, the profiles may also be helpful for determining the success and progress of the apprentices.

The site also provides several helpful resources, such as information about national standards and trade certification, a link to the AJCTC program and links to the provincial and territorial apprenticeship branch offices.

Claiming the AJCTC

Employers may claim the credit on their income tax returns, using either the Form T2038 (IND) - Investment Tax Credit (Individuals) or Form T2SCH 31 - Investment Tax Credit - Corporations. Note

• The apprentice must be registered with either a federal, provincial or territorial government or the input tax credit (ITC) will not be allowed.
• The allowable tax credit is 10% of the eligible salary or wage paid to the apprentice to a maximum of $2,000.
• If the tax filer does not have enough taxes payable to deduct the AJCTC in full, any unused credits may be carried back three years and carried forward 20 years.
• The employee may also be entitled to an Apprenticeship Incentive Grant of $1,000 per year to a maximum of $2,000.

Building a Skilled Workforce

Apprentices trained within your organization who then become qualified journeypersons can help ensure you have the skilled labour you need to replace those who will be retiring. Consider also that “homegrown” journeypersons are often a better fit within the organization and thus may be more productive than an externally-trained journeyperson.