This strange year is close to coming to an end. Where most years, December is spent shopping, decorating, and looking forward to parties and vacations, this December could not be more different. Some of our clients are finding themselves still recovering from the first wave of the pandemic, while others are neck deep in dealing with the impact of the second wave. We, in turn, find our role shifting from being bystanders to their struggles to offering practical advice and often moral support.
How we wish we had the power to make this madness stop…
Where our earlier blogs were written largely without seeing the financial impact the pandemic has caused (at the time, we were working on years that ended between December 2019 and March 2020), we are now working through results that capture several months of the pandemic. Some stories are inspiring and encouraging, some downright heartbreaking. But there is a common theme that is emerging – not everyone is taking advantage of the support programs to their full extent.
This blog will not only introduce details of the new rental subsidy program (CERS), but will also highlight most commonly missed opportunities for government support. The good news is that many of the programs can be applied for retrospectively (keeping application deadlines in mind).
Canada Emergency Rent Subsidy (“CERS”)
We touched on this program’s arrival in our earlier blog. We are happy to report that the subsidy applications for eligible expenses paid from September 27, 2020 to October 24, 2020 are open. The program will be available until June 2021. Eligibility is based on your business’ revenue decline – meaning that that there is an opportunity to benefit from both CEWS and CERS simultaneously.
Rules continue to be confusing, so we thought we would outline some scenarios that would suggest that you might be eligible for the subsidy:
- You run an operating business and lease your space from an arm’s length landlord. Your business suffered a revenue decline (measured the same way as CEWS). Subject to a few more eligibility hurdles being addressed, you will qualify for subsidy on rental, CAM, TMI, property tax, etc amounts paid in respect of your lease.
- You run an operating business and own your own real estate in the same company. Your business suffered a revenue decline (measured the same way as CEWS). You could be eligible for subsidy on interest paid on your mortgage, property insurance, and property taxes.
- You run an operating business and pay rent to a related company. In other words, the real estate is owned in a separate company in your group. Your operating business suffered a revenue decline. In this case, because the operating company pays rent to a related company, the rental payments don’t meet eligibility criteria. However, elections for calculating revenue decline of the real estate rental company based on the decline in operating company’s revenue are available, which could make the real estate company eligible for subsidy on interest paid on the mortgage, property insurance, and property taxes.
As we said, the rules are complex and apply based on the circumstances of the particular business. The relief is directed to active businesses and generally, residential and commercial landlords do not qualify for CERS (except when a commercial landlord rents the property to a non-arm’s length party).
The subsidy has two components – Base and Lockdown Support:
Base Subsidy:
The amount of base subsidy depends on how significant the decline in revenue is, with a maximum of 65% of qualifying expenses paid, or payable, eligible for subsidy. The maximum expenses claimed per qualifying period, per location is $75,000. A maximum of $300,000 of qualifying expenses can be claimed in a qualifying period by a group of affiliated companies. This means that maximum base CERS is $195,000 per affiliated group of companies, per claim period.
Lockdown Support:
Up to an additional 25% is given to businesses who suffered a revenue decline and had one or more locations temporarily closed, or have activities significantly restricted for a week or longer due to a COVID-19-related public health order. Up to $75,000 of eligible expenses can be claimed for each qualifying period, with no limit based on the number of locations.
Full information on this subsidy is here:
https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-rent-subsidy.html
Let us know if you need help deciphering this new program.
Canada Emergency Bank Account (CEBA)
We touched on the increase in the CEBA loan amount to $60,000 (with $20,000 forgivable) in our last blog. Where we see a lot of businesses taking advantage of the initial $40,000, very few have taken advantage of the additional $20,000.
The deadline to apply is March 31, 2021 and can be done through your financial institution.
Canada Emergency Wage Subsidy (CEWS)
Although some tweaks to the program were announced recently, they affect the mechanics of calculating how much subsidy your business is eligible for. What we want to emphasize is that if your business suffered a revenue decline in month to month revenue from March 2020 onwards, you should consider applying for the subsidy.
Deadlines for retrospectively applying were recently announced. The deadline is the later of 180 days from the end of a claim period, and January 31, 2021. This means that claim periods 1-5 must be filed by January 31, 2021. Subsequent deadlines are as follows:
Claim Period 6 – February 25, 2021
Claim Period 7 – March 25, 2021
Claim Period 8 – April 22, 2021
Claim Period 9- May 20, 2021
Claim Period 10- June 17, 2021
We hope you find our regular newsletters helpful. If there are other topics you would like us to cover, don’t hesitate to make suggestions.