It has been some time since our last blog and we thought it would be a good time to provide an update on the status of the various Covid-19 relief programs, some of which have expired, expanded or been extended since our last communication. My partner, Anastasia, has set out in some detail the current status of these programs in this blog. Please do not hesitate to contact us if you have any questions or require assistance with an application.
As we approach Thanksgiving, and enter our seventh month of living with the impact of Covid on so many aspects of our lives, it is a good time to reflect on the things for which we should be thankful.
We should be thankful if we have good health. Beyond the tragedy of so many deaths attributable to this disease, there are many people and families dealing with serious health issues unrelated to the pandemic, but certainly made more difficult by the present circumstances.
We should be thankful for our families. In the current vernacular, our family is our bubble and we are likely spending more time with our immediate families than ever before. At the same time, we are largely precluded from spending time with family members outside of our households, particularly elderly parents and, for many, this Thanksgiving will be very different. For myself, I have found that the health crisis has provided perspective on what is important, has slowed the pace of life somewhat and brought our own family closer together.
We should be thankful If we own a business that has some natural resilience to the economic impact of the pandemic, or we have been able to pivot or adapt the business to the new circumstances. Revenue may not be as high as the prior year, or profits as robust, but there are many, many businesses on the front lines of this debacle that have no opportunity to adjust and may not recover.
While it sometimes feels like this will never end, and the masks and lineups and Zoom meetings are becoming beyond tiresome, sunnier days will surely return. In the meantime, it can only be beneficial to do our best to adopt an orientation of gratitude and to keep in our thoughts those who are less fortunate.
Happy Thanksgiving.
Steve
Update on Covid-19 Relief Programs
Canada Emergency Wage Subsidy (CEWS)
CEWS has been around since the early days of the pandemic and continues to provide relief for businesses whose revenues have seen a decline. As we highlighted in our previous blog, the program changed quite substantially from July onwards. The re-imagined CEWS is a lot more inclusive since there is no more minimum required 30% decline in revenue. The amount of subsidy received is proportionate with the revenue decline.
We encourage our clients who experience either a decline in revenues or a slow-down in collections to revisit the eligibility criteria. Applications are now open for the wages paid between August 30 and September 26, 2020 (Period 7). If you haven’t claimed the subsidy and realize that you are eligible, you are able to submit claims for periods 1-6 to catch up.
The existing rules are in effect until December 2020, but the government did announce the plan to have the wage subsidy extended into next summer.
Details on the CEWS can be found here:
https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-wage-subsidy.html
10% Temporary Wage Subsidy
Remember this one? Back when we all had no idea of what it would be like to live in a global pandemic, the government very quickly announced that businesses could keep a portion of their payroll remittances (up to 10% of the wages paid, capped at $25,000 per employer). Then everyone very quickly realized that it is a drop in the bucket compared to the financial strain some businesses would experience and CEWS (aka the 75% subsidy) was introduced.
The 10% subsidy is applicable to remuneration paid between March 18 and June 19, 2020, up to $1,375 for each eligible employee, to a maximum of $25,000 per employer. Although a business may be eligible for both subsidies, there is no double dipping – the amount of the 75% subsidy is reduced by the amount of the 10% subsidy claimed.
Although the period covered by the subsidy has expired, businesses still have the ability to claim the 10% subsidy by reducing payroll remittances made after the subsidy period.
CRA made available a self-identification form which allows businesses to report the amount of the subsidy they are eligible for and how much was claimed. To the extent your eligibility exceeds the amounts you claimed by reducing your remittances, CRA will either pay the amount of subsidy to you or transfer the amount to your next year’s remittance balance.
What does all of this mean?
- If you never claimed the 10% subsidy, but did claim the 75% subsidy and did not reduce it by the amount of the 10% subsidy you are eligible for, submit the self-identification form and elect at $0.
- If you were not eligible for the 75% wage subsidy because your revenue decline for period 1-3 was not high enough, you likely do qualify for the 10% subsidy – consider submitting the self-identification form to claim the subsidy.
- If you did claim the 10% subsidy by reducing the amount of payroll remittances and CEWS claimed, submit the self-identification form for CRA to reconcile your payroll account before T4s are issued.
Complete information on the 10% subsidy can be found here:
https://www.canada.ca/en/revenue-agency/services/subsidy/temporary-wage-subsidy.html
Canada Emergency Business Account (CEBA) interest-free loans
CEBA provides interest-free loans of up to $40,000 and is implemented through financial institutions. Up to $10,000 (25%) of the loan becomes forgivable if the loan is repaid before December 31, 2022.
Eligibility criteria have been expanded making more businesses eligible. The program will remain in effect until October 31, 2020, providing an opportunity for businesses who have not yet taken advantage of this to apply.
It is worth noting that if you have several operating companies, each qualifying business that has a CRA business number is eligible to apply.
More information on CEBA is here:
Loan Guarantee and Co-Lending Programs for Small and Medium-Sized Businesses
Export Development Canada (EDC) and Business Development Canada (BDC) are working with financial institutions to provide new operating credit and cash flow term loans of up to $6.25 million. These loans are available to both exporting and non-exporting SMEs.
This support is available until June 2021 and is meant to manage financial institutions’ risk in providing lending to support cash flow needs of the businesses during the pandemic.
If you cash flow analysis suggests that you may need access to financing to ride out the pandemic, speak to your financial institution about availability of BCAP loans and/or co-lending programs.
https://www.edc.ca/en/solutions/working-capital/bcap-guarantee.html
https://www.bdc.ca/en/pages/co-lending-program.aspx
Canada Emergency Commercial Rent Assistance (CECRA)
This program allowed landlords of small businesses who experienced at least a 70% decline in revenue in April to June of 2020 compared to the same period in 2019 to access forgivable loans covering 50% of the rent if they agreed to waive 25%, with tenants paying the remaining 25% rent owing.
Although the period for new applications closed on September 30, 2020, businesses who qualified for the support based on the above criteria automatically qualify for the program for July to September and have the option to opt-in for the additional months without reassessing whether they continue to have a 70% revenue decline in July to September. Participating in the extension is voluntary. The deadline to opt-in is October 30, 2020.
https://www.cmhc-schl.gc.ca/en/finance-and-investing/covid19-cecra-small-business#5&seventy
CRA Extensions for Payment of Personal and Corporate Income Tax Balances Due
Interest and late filing penalties were previously waived for the period from April 1, 2020 to September 30, 2020 for income tax and instalment obligations arising prior to September 30. This effectively extended all income tax payments to CRA until September 30.
With September 30 now behind us, amounts that that were previously deferred have become due. Where most people are keenly aware of their year end personal and corporate income tax balances due, instalment obligations are confusing to some.
Generally speaking, an individual or a corporation with a tax balance payable of $3,000 or more in a given year is required to make instalments for its following taxation year. Individuals and certain small Canadian-controlled private corporations make these instalments on a quarterly basis. All other corporations are required to make monthly instalments.
Interest is charged on instalments made late or underpaid. The rate charged is based on CRA’s prescribed rate (currently at 5%), which results in non-deductible interest costs to the taxpayer.
We recommend that you review your instalment schedules and make best efforts to ensure that instalment payments that were deferred until September 30 are promptly made.
If you expect to have no taxable income or expect a reduction in taxable income for the current taxation year, give us a call to discuss whether your instalment payments should be modified from the schedule provided.
If you cannot pay your balance owing on or before September 30, 2020, the CRA may accept a payment arrangement only after you have reasonably tried to get the necessary funds by borrowing or rearranging your financial affairs. More on CRA payment arrangements is here: