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Principal Issues: [TaxInterpretations] Where an apprentice works for more than one employer in Quebec or elsewhere in a taxation year - and the employers are not related to each other - must the $2,000 limit in the definition of "apprenticeship expenditure" be allocated to only one employer?
Position: No.
Reasons: Where the legislator provides for a general rule and lists certain exceptions, these must be regarded as exhaustive and therefore interpreted strictly.
April 9, 2008
Montreal Tax Services Office Headquarters
Business and Partnerships Division
Attention: Paulette Lachance François Bordeleau, Advocate
2008-026888
Apprenticeship Job Creation Tax Credit ("AJCTC")
This is in response to your email of February 20, 2008 in which you requested our opinion on the AJCTC.
More specifically, where an apprentice works for more than one taxpayer (the "employer") in the construction industry in Quebec in a taxation year - where the employers are not related to each other - you wish to know whether the $2,000 limit provided for in the definition of "apprenticeship expenditure" in subsection 127(9) of the Income Tax Act (the "Act") must be allocated to a single employer.
Unless otherwise indicated, all statutory references herein are to the provisions of the Act.
Our Opinion
The AJCTC is based on the apprenticeship expenditure incurred by an employer for a taxation year in respect of an eligible apprentice. The apprenticeship expenditure is the lesser of $2,000 and 10% of the eligible salary and wages payable by the employer to the eligible apprentice for employment after May 1, 2006.
An eligible apprentice is defined 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 two years of the individual’s apprenticeship contract registered with the province or Canada, as the case may be, under an apprenticeship program designed to certify or license individuals in the trade.
In the field of construction in Quebec, the Commission de la construction du Québec ("CCQ") is responsible for the following:
- manage the apprenticeship scheme and the apprenticeship booklet;
- collect the hours worked by apprentices at a company for inclusion in the booklet to track the progress of apprentices in their apprenticeship;
- confirm to the employer, by means of a hire and layoff number, that an apprentice has been hired and laid off in accordance with regulatory requirements. Without this confirmation that an apprentice can be hired, the employer is in breach of the law and is liable to a criminal conviction;
- to monitor the progress of apprentices and to qualify them.
As an exception to the general rule that each employer of an eligible apprentice may claim the AJCTC, where an eligible apprentice is employed by more than one employer in a taxation year and the employers are all related to each other, subsection 127(11.4) provides that no employer may claim the AJCTC in respect of the eligible apprentice unless all of the related employers have designated one employer as the apprentice's only employer for the purposes of the AJCTC.
Where the legislator provides a general rule and lists certain exceptions, the latter must be considered exhaustive and therefore interpreted strictly. Thus, based on our interpretation of the relevant provisions of the Act, we are of the view that, in the case of employers in Quebec or elsewhere who are not related to each other, there is no rule analogous to subsection 127(11.4) that would apply the $2,000 limit in the definition of "apprenticeship expenditure" in subsection 127(9) to a single employer.
For your information, unless exempted, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency's electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, the electronic library version can be provided. Alternatively, the client may request a severed copy using the Privacy Act criteria, which does not remove client identity. Requests for this latter version should be made by you to Ms. Jackie Page at (819) 994-2898. A copy will be sent to you for delivery to the client.
We hope that these comments are of assistance.
Randy Hewlett
Manager
Business and Partnerships Section
Income Tax Rulings Directorate.
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