Shipbuilding & Ship Repair Industry Tax Credit Frequently Asked Questions

The following will help answer your questions about the shipbuilding and ship repair industry tax credit.
 

How is principal business determined?

When an employer engages in more than one business, principal business is determined by an examination of all the facts concerning each of the various types of business.

My principal business is building boats and yachts for personal and recreational purposes.  Am I eligible to claim the credit?

No. If your principal business is building boats, yachts or other water crafts ordinarily used for personal or recreational purposes, you are not eligible to claim the credit. However, you may still be eligible to claim the B.C. training tax credits for employers if you meet the eligibility requirements.

I repair both recreational yachts and boats but occasionally I repair eligible ships. Am I eligible to claim the credit?

The construction, repair or conversion of ships must be your principal business to claim the shipbuilding and ship repair industry tax credit.

If my business is eligible for this credit but also has other business activities, am I required to divide eligible salaries based on the activities performed by the apprentices?

No. If you’re eligible to claim the shipbuilding and ship repair industry tax credit, you can claim that credit for all eligible apprentices.

Can an apprentice claim the credit?

No. The shipbuilding and ship repair industry tax credit is only available to employers. However, an eligible apprentice may claim the B.C. training tax credits for individuals.

Can I claim both this credit and the B.C. training tax credit for employers?

It is only possible for an eligible employer to claim both the shipbuilding and ship repair industry tax credit and the B.C. training tax credit for a tax year that straddles October 1, 2012. The eligible employer is subject to a maximum claim of $5,250 per apprentice for that tax year. This maximum amount is the total for both the training tax credit and the shipbuilding and ship repair industry tax credit.

For all subsequent taxation years an eligible employer cannot claim both the shipbuilding and ship repair industry tax credit and the B.C. training tax credit for employers.

How do I calculate the maximum tax credit amount if my tax year straddles October 1, 2012?

If you are completing the tax return for a corporation, use Schedule 430, British Columbia Shipbuilding and Ship Repair Industry Tax Credit, of the T2 return. If you are otherwise eligible for this tax credit and are not a corporation and are required to file a T1 return, complete form T1014-2, British Columbia Shipbuilding and Ship Repair Industry Tax Credit (Employers), with your T1 return. 

These forms provide instructions for calculating the amount of the shipbuilding and ship repair industry tax credit that can be claimed where a tax year straddles October 1, 2012 and you are eligible for both the B.C. training tax credits and the shipbuilding and ship repair industry tax credit in respect of an employee.

Example:

For an eligible employer whose tax year ends on March 31, 2013:

For the period from April 1, 2012 to September 30, 2012, you may claim the basic credits for apprentices registered in the first 24 months of a non-Red Seal program under the B.C. training tax credits for employers.

For the period from October 1, 2012 to March 31, 2013, you may claim the basic credit for apprentices registered in the first 24 months of either a Red Seal or a non-Red Seal program under the shipbuilding and ship repair industry tax credit. However, you are limited to a total maximum claim of $5,250 per employee for that tax year (i.e. you cannot claim the maximum training tax credit ($4,000) and the maximum shipbuilding and ship repair industry tax credit ($5,250) in respect of an employee).

If an apprentice completes level 3 before October 1, 2012 and level 4 after September 30, 2012 in the tax year, you can claim the completion credit under the B.C. training tax credits in respect of level 3 and the completion credit under the shipbuilding and ship repair industry tax credit in respect of level 4.

Can I claim the basic credit for an apprentice registered in the first 24 months of a Red Seal program?

Yes. This is different from the B.C. training tax credit for employers where an employer can claim the basic credit only in respect of a non-Red Seal program. Under the shipbuilding and ship repair industry tax credit, you can claim the credit for an apprentice registered in the first 24 months of both a Red Seal and a non-Red Seal program.

What is included in eligible salary and wages?

Eligible salary and wages are the gross salary and wages you pay to an eligible apprentice. It does not include remuneration based on profits, bonuses and taxable benefits including stock options, and certain unpaid remuneration.

Are partnerships eligible for the credit?

Yes, a corporation or an individual that is a member of a partnership, other than a specified member, can claim their proportionate share of the partnership's shipbuilding and ship repair industry tax credit.

Is the credit taxable for employers?

Yes. The shipbuilding and ship repair industry tax credit is considered to be government assistance and must be reported either as taxable income or as a reduction of expenses or costs.

What happens when two or more related employers employ the same apprentice?

Employers who are related and employ the same apprentice during a taxation year must share the maximum amount of the credit that would be available if that apprentice were employed by only one of those employers.

Who administers the credit?

The Canada Revenue Agency (CRA) reviews and audits claims and issues refund cheques where appropriate. If you disagree with the amount of the credit assessed by the CRA, a Notice of Objection should be filed within 90 days of the date of the Notice of Assessment.