Little known tax credit for small business

As a small business owner, have you expanded your staff in 2012?

As a small business owner, have you expanded your staff in 2012?

With little media coverage, earlier in 2012 the federal government extended for this year, its Hiring Credit for Small Business (HCSB) that was offered as a onetime credit for 2011.

For the purpose of this credit, a small business is defined as a proprietorship with employees or small corporation (the owner is an employee by default) not having annual employment insurance (EI) premium contributions greater than $10,000.

The HCSB is an EI credit designed to encourage new hiring by reimbursing a small business owner the amount of the year over year increase in EI premiums paid by that business, up to a maximum of $1,000.

For example, if in 2011 a business had $3,000 of employer EI premiums and then with new hires has $3,600 in 2012, the business will receive a $600 credit.  Likewise, if the amounts were $500 in 2011 and then $2,500 in 2012, the HCSB maxs at $1,000.

This credit is not limited to only businesses having new hires.  If a business has expanded the hours of its staff in 2012 resulting in increased EI premiums, this will contribute to the HCSB for that business.

And new business start-ups qualify if the business owner remitted EI premiums in 2012. The base amount will be $0 (since there would have been no premiums in 2011) so in effect, a 2012 business start-up will pay no EI premiums for 2012.

Impressively, the HCSB calculation is done by the government and the credit issued automatically. That’s right.  No special forms.  No record keeping beyond normal payroll paperwork.  Well, the T4’s have to be issued and the T4 summary submitted to CRA, but that’s it. Then await the credit in the spring of 2013.

At this time, there is no scuttlebutt out of Ottawa that the HCSB will be extended to 2013, so if you have been procrastinating on hiring new staff or expanding current staff hours, making these decisions sooner rather than later may not be as costly as normal. And keep an ear to the ground for the extension of the HCSB into 2013.

Ron Clarke has his MBA and is a business owner in Trail, providing accounting and tax services.  Email him or see all previous columns at