There are generally costs associated with hiring new employees – advertising costs, placement or recruitment agency fees, the time required to interview and evaluate candidates, etc. What some employers aren’t aware of is the fact that there are income tax credits (some refundable, others can only be used to reduce actual taxes owing) that can reduce the costs associated with hiring certain types of employees.
Both the Federal and Ontario governments offer tax credits for hiring apprentices. The Ontario Apprenticeship Training Tax Credit (“ATTC”) is available to employers who hire individuals as apprentices in a qualifying skilled trade approved by the Ministry of Training Colleges and Universities (Ontario). The training agreement or contract between the employer and apprentice must be registered under the Ontario College of Trades and Apprenticeship Act, the Apprenticeship and Certification Act or the Trades Qualification and Apprenticeship Act in order to be eligible for the credit. The Federal credit, the Apprenticeship Job Creation Credit (“AJCC”), is more restrictive and is only available for employers who hire Red Seal Trades.
The ATTC is a refundable credit and is calculated as 35% – 45% of the total salaries and wages (including taxable benefits) paid to an eligible apprentice in a particular year up to a maximum credit of $10,000 per year per apprentice for the first 48 months of the apprenticeship. Percentages are based on total salaries and wages paid in the previous taxation year and are reduced for years prior to 2010.
The AJCC is a non-refundable credit and is calculated as 10% of the total salaries and wages (including taxable benefits) paid to an eligible apprentice in a particular year up to a maximum credit of $2,000 per year per apprenticeship for the first 24 months of the apprenticeship.
Both the ATTC and AJCC are considered government assistance and must be included in the employer’s income in the year claimed or the subsequent year, respectively.
We have often filed amended tax returns for employers who previously did not claim these apprenticeship tax credits in their original returns, but employers should be aware that all AJCC claims must be made within 18 months of the taxpayer’s fiscal year-end, otherwise no claim is permitted. There is no such restriction for the ATTC.
Another tax credit available to employers that often goes unclaimed because taxpayers are not aware of it is the Ontario Co-Operative Education Tax Credit (“CETC”). The CETC is also a refundable tax credit that is intended to provide an incentive to employers to hire co-ops. The credit is calculated as 25% – 30% of the total salaries and wages (including taxable benefits) paid to a co-op who is hired as part of a qualifying work placement. A qualifying work placement is one where the student is paid by the employer, the work term is for a period of at least 10 consecutive weeks (or if it is an internship, no less than 8 consecutive months and no more than 16 consecutive months) and the co-op program is a qualifying co-operative education program. The maximum credit is $3,000 per co-op hired per work placement term.
If you are an employer who has previously hired apprentices or co-op students, but have failed to claim these credits in the past, we would be pleased to work with you in filing amended returns for prior years in order for you to obtain these tax credits you are entitled to.