Corporate Income Tax, Personal Income Tax, Small Business

BCEBW, CESB, CECRA & CEWS

This post deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.

Although every reasonable effort has been made to ensure the accuracy of the information contained in this article, no individual or organization involved in either the preparation or distribution of this letter accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

CRA Calls

A reminder, if you ever get a call from someone claiming to be from the CRA, you should exercise caution.  One option is to contact the general business number at 1-800-959-5525 or individual number 1-800-959-8281 to confirm that this a valid call (either confirm a name, phone number or badge number).

Even in times of crisis, there are those looking to take advantage of others.

BC Emergency Benefit for Workers

The BC Government has opened applications for a one-time tax-free payment of $1,000 for BC residents who have met the eligibility requirements for the Canada Emergency Response Benefit (CERB).

To be eligible for the BCEBW, you must:

  • Have been a resident of British Columbia on March 15, 2020
  • Meet the eligibility requirements for the CERB
  • Have been approved for the Canada Emergency Response Benefit, even if you haven’t received a federal benefit payment yet
  • Be at least 15 years old on the date you apply
  • Have filed, or agree to submit, a 2019 BC income tax return
  • Not be receiving provincial income assistance or disability assistance

Note

If you have returned to work and still meet the requirements of the CERB, you will still be eligible for the BCEBW as long as you are not required to repay the CERB.

More details on applying can be found here.

Canada Emergency Student Benefit

The Federal Government has announced that the Canada Emergency Student Benefit (CESB) will be available for students and new graduates who are not eligible for the CERB or EI.  The CESB will provide $1,250 per month for eligible students or $2,000 per month for eligible students with dependents or disabilities.

The CESB will be available for May to August 2020, and more details will be released “soon.”  We’ll try to update when this becomes available, or you can watch here for updates.

Canada Emergency Commercial Rent Assistance

The Canada Emergency Commercial Rent Assistance (CECRA) has been created by the Federal Government and administered by the Canada Mortgage and Housing Corporation (CMHC).  It will offer forgivable loans to Property Owners so that they can reduce the rent owed by small business tenants.

Eligibility

Property Owners will be eligible if they:

  • generate rental revenue from commercial real property located in Canada and have declared rental income on your personal or corporate tax return for 2018 or 2019
  • are the owner of the commercial property where the tenant is an impacted small business
  • have a mortgage secured by the commercial real property (alternative mechanisms will be implemented for those without a mortgage)
  • have or will reduce rents for April, May and June by at least 75% (must be all months by the looks of it)
  • agree to a moratorium on evictions for April, May and June

If rent has been collected at the time of approval, a credit for a flexible 3-month period to the tenant for future rent will be acceptable if agreed to by the property owner and tenant.

What is an “impacted small business”

An impacted small business is:

  • a small business tenant or subtenant
  • a business, non-profit or charitable organization
  • one that pays no more than $50,000 in gross monthly rent
  • one that generates no more than $20 million in gross annual sales calculated on a consolidated basis (at the parent level), and
  • one that has ceased operations, or has experienced a decline of 70% or more compared to pre-COVID19 revenues.  The decline of revenues will be calculated similarly to the CEWS, so April, May and June 2020 compared to April, May and June 2019 or to the average of Jan/Feb 2020 (potentially a hard bar to meet…)

How it will work

The CMHC will provide a forgivable loan to the property owner:

  • the loan will be 50% of the gross rent owed by the impacted small business during the three months of April, May and June 2020
  • the tenant will be responsible for paying no more than 25% of the total rent
  • the property owner will be responsible for paying no less than 25% of the total rent

Example

  • Monthly commercial rent is $10,000
  • The landlord applies for the CECRA and receives 50% of the regular rent, $15,000 for all three months ($5,000/ month) as a forgivable loan
  • The landlord reduces rent by 75%, so the tenant only pays $2,500 per month
  • The landlord will have then received $2,500 for that month from the tenant and $5,000 from the CMHC and will be responsible for the remainder (presumably this will just be absorbed)

Applications are to open mid-May through the CMHC’s website, and you can sign up for notifications here.

CEWS Update

Previously we had taken the stance that the Canada Emergency Wage Subsidy (CEWS) was available based on remuneration paid in the respective claim period.

New guidance provided by the CRA has clarified what we should be looking to in calculating the CEWS. We should be looking to what the employee earned in the period to calculate the subsidy. Additionally, we must wait until the employee has been paid before the application for the subsidy can be made.

Example

The CRA gives the example of an employee that works all of April and then receives payment on May 1.  The first claim period is from March 15 to April 11, and so that employee would not have been paid for the April 1 – 11 period until May 1. Therefore we cannot apply for the subsidy until May 2, which is after that the employee receives payment.

Hourly Workers

The CRA has also clarified cases where employees are paid an hourly wage.  Specifically, they have specified that we cannot use the average for the period to calculate an average daily wage.  Instead, we must use the actual wage for each day in a given claim period.

How does this affect filings already made?

We anticipate any differences resulting from these developments in understanding to be relatively minor and so do not expect a significant effect.  Currently, there is no mechanism for amending a filing, but this would be something to watch for if the difference is more than nominal.

Below are updated videos to reflect this new understanding:

Re-Apply for the CEWS

Re-Apply for the CEWSThe next claim period is April 12 – May 9, so you should be able to apply on May 10, provided you have paid your staff for the period as noted above.

If your business had already qualified for the CEWS based on a decline in March’s revenues, you would be eligible for the April 12 – May 9 payroll claim period, whether you show a decrease in revenues for April or not.  If you did not qualify for March, then you must confirm that you are eligible for April.  We have some guidance on that here and videos on how to do the calculation here.

You here can go to CRA’s site apply for the subsidy.

One thing to note is that the application asks you to attest that the business qualifies.  We strongly urge caution here.  If there is any doubt as to whether your business qualifies or not, please contact us, and we’ll do our best to provide some guidance.

We hope you’re all staying healthy!

Best regards,
Andrew de Verteuil, CPA, CGA
de Verteuil & Company Inc.

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