12 February 2013 Ministerial Correspondence 2013-0474471M4 - Apprenticeship Job Creation Tax Credit

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: 1. For purposes of an employer computing its eligible salaries and wages payable for purposes of claiming the apprenticeship job creation tax credit, whether an employee who is an apprentice in a federally regulated trade such as an aircraft maintenance engineer licensed by Transport Canada can be considered an "eligible apprentice" within the meaning of subsection 127(9) of the Income Tax Act. 2. Whether an individual apprenticing to become licensed as an aircraft maintenance engineer is entitled to the apprenticeship incentive grant and/or the apprenticeship completion grant.

Position: 1. No. 2. No.

Reasons: 1. The definition of "eligible apprentice" in subsection 127(9) of the Act refers to "a trade prescribed in respect of a province or in respect of Canada. It is interpreted to refer to a trade prescribed in respect of a province and/or territory or a trade prescribed in respect of Canada. Although an aircraft maintenance engineer is a trade that is federally regulated and as such, can be considered to be a trade in respect of Canada, it is not a trade "prescribed" in respect of Canada. Section 7310 of the Income Tax Regulations defines what is a "prescribed trade in respect of a province" (i.e., the Red Seal trades) and in that regard, an aircraft maintenance engineer is not a Red Seal trade. As currently enacted, the Regulations are silent on what is a "prescribed trade in respect of Canada" and in this regard, there are no draft amendments to the Regulations currently proposed. 2. Not a Red Seal trade.

XXXXXXXXXX

Dear XXXXXXXXXX:

The office of your member of Parliament, XXXXXXXXXX, sent me a copy of your correspondence, which I received on January 4, 2013, about the apprenticeship job creation tax credit (AJCTC) and the apprenticeship incentive.

The Income Tax Act allows an employer to claim the AJCTC for its eligible salary and wages payable to eligible apprentices. The Act defines an "eligible apprentice" as an individual who is employed in Canada in a trade "prescribed in respect of a province or in respect of Canada" during the first 24 months of his or her apprenticeship contract. This contract must be registered with a provincial, territorial, or federal government under an apprenticeship program designed to certify or license individuals in the trade.

According to the Income Tax Regulations, a "prescribed trade in respect of a province" is a Red Seal trade under the Interprovincial Standards Red Seal Program. For a trade to be designated as a Red Seal trade, a number of provinces and territories should already have independently designated that trade for apprenticeship training and certification. It is up to the industry to submit a request for the designation of a trade under the Red Seal Program.

Your concern relates to apprentices training to be licensed by Transport Canada as aircraft maintenance engineers. This federally regulated trade is not a designated Red Seal trade and the Regulations do not define what a "prescribed trade in respect of Canada" is. Since this trade is not a prescribed trade in respect of a province or Canada, an apprentice in this trade does not meet the Act's definition of "eligible apprentice." Therefore, an employer cannot claim the AJCTC for apprentices in this trade. I am unaware of any draft or proposed amendments to the Regulations at this time. The Department of Finance Canada is responsible for setting tax policy concerning whether the AJCTC should include an employer's salaries and wages payable to apprentices in federally regulated trades.

Human Resources and Skills Development Canada (HRSDC) administers tax incentives for apprentices, such as the apprenticeship incentive and the apprenticeship completion grants. To qualify for these grants, the apprentice must meet several conditions, including being registered in a Red Seal trade. Since the aircraft maintenance trade is not a Red Seal trade, an aircraft maintenance engineer apprentice would not qualify. HRSDC is responsible for economic development policy concerning whether the eligibility for these grants should include apprentices in federally regulated trades.

You are concerned that the shortage of licensed aircraft maintenance engineers will only get worse. However, I must confirm that there are currently no federal tax incentives to help employers wanting to hire and train more aircraft maintenance engineers or to entice individuals to choose a career in the aircraft maintenance trade.

Since the concerns you raise are policy matters that are the responsibility of Finance Canada and HRSDC, I am forwarding a copy of our correspondence to the Honourable James M. Flaherty, Minister of Finance, and the Honourable Diane Finley, Minister of Human Resources and Skills Development, for their consideration.

I trust that the information I have provided and the referrals are helpful.

Yours sincerely,

Gail Shea, P.C., M.P.

c.c.:The Honourable James M. Flaherty, P.C., M.P.
Minister of Finance
House of Commons
Ottawa ON K1A 0A6

The Honourable Diane Finley, P.C., M.P.
Minister of Human Resources and Skills Development
House of Commons
Ottawa ON K1A 0A6

XXXXXXXXXX

Tim Fitzgerald, CGA
(613) 941-7239
2013-047447