Help clients better navigate the government’s new recovery benefits

As the federal government extends its pandemic support measures, businesses may be eligible for more financial assistance (Getty Images/kate_sept2004)

More than seven months into the COVID-19 pandemic, Canadians continue to struggle financially as the battered economy gradually re-opens and businesses attempt recoveries from lockdowns, job cuts and revenue loss.

Government financial support measures will continue to be crucial in helping businesses stay afloat and keeping Canadians from spiralling into debt.

During this time, CPA Canada has been at the forefront engaging with the Canada Revenue Agency (CRA) and other federal government officials, providing recommendations and input from the CPA profession. 

Through its COVID-19 resources, tax updates, webinars and blog, CPA Canada is keeping members, their clients and the Canadian business community informed on the latest pandemic information and government measures. 

Here is an up-to-date summary of the financial support offered by the federal government through Canada’s COVID-19 Economic Response Plan. 

SUPPORT BENEFITS

New Recovery Benefits 
With Bill C-4 receiving Royal Assent, following the federal government’s Throne Speech commitments, more details have emerged on how new COVID-19 recovery benefits will be implemented.

Subsequently,  three new temporary recovery benefits have been launched: 

Canada Recovery Benefit (CRB) provides $500 per week for up to 26 weeks to workers who have stopped working or had their income reduced by at least 50 per cent due to COVID-19, and who are not eligible for Employment Insurance (EI). 

Canada Recovery Sickness Benefit (CRSB) provides $500 per week for up to two weeks for workers who are unable to work for at least 50 per cent of the week because they contracted COVID-19 or are self-isolating due to COVID-19. 

Canada Recovery Caregiving Benefit (CRCB) provides $500 per week for up to 26 weeks per household for eligible Canadians unable to work for at least 50 per cent of their scheduled work week because they are caring for a child under 12 years old or a family member due to one of the following reasons:

• They require supervised care because their school, daycare, day program or care facility is closed or unavailable due to COVID-19
• Their regular care services are unavailable due to COVID-19
• They are sick with COVID-19 or have COVID-19 symptoms, at risk of serious health complications if they get COVID-19 or self-isolating due to COVID-19.

For all three benefits, additional conditions apply so be sure to read the details which are discussed on the CRA’s website for each benefit. 

According to the CRA, amounts received under all three benefits are taxable and a 10 per cent withholding tax will be applied at source and T4A slips will be issued reflecting the total CRA administered COVID-19 benefits received and taxes withheld at source.   

TAX ADJUSTMENTS

T4 Reporting requirements 
The CRA announced new T4 reporting requirements applicable to all employers that involve reporting amounts paid during specific periods of 2020. This has been done to help the government validate benefit payments under the Canada Emergency Wage Subsidy (CEWS), the Canada Emergency Response Benefit (CERB) and the Canada Emergency Student Benefit (CESB). CPA Canada has asked the CRA to provide more detailed guidance, but keep in mind that the additional reporting is based on when amounts were paid to the employee and not earned. 

Scientific Research and Experimental Development (SR&ED) Tax Incentive Program
A ministerial order allowed the CRA to extend certain deadlines under the Income Tax Act, including SR&ED claims that occurred after March 13, 2020. No SR&ED reporting deadlines are extended past December 31, 2020. More information on the specific deadline extensions for corporations, trusts and individuals are summarized on the CRA site. 

SUPPORT FOR BUSINESS

The federal government continues to financially support small businesses through the pandemic with various wage subsidies, loans and other programs. Here is a round-up of the assistance that continues.   

Canada Emergency Wage Subsidy (CEWS)
The CEWS program—which helps employers that experienced revenue declines due to COVID-19 cover wages re-hire terminated employees, prevent further job loss and facilitate normal operations— will be extended to June 2021 if recent proposals become law. This benefit consists of a base subsidy for all eligible employers, as well as a top-up subsidy for applicants hardest hit. “Overall, we believe these latest changes will help in easing concerns raised by businesses and other stakeholders, although some issues remain such as complexity,” says Bruce Ball, vice-president, taxation, for CPA Canada. [Read CPA Canada’s July and August tax blogs on details and best practices for using the CEWS calculator.]

Look to the CRA’s CEWS application guide for more details on new rules and tools. For a detailed list of changes, see the CRA’s CEWS What the changes are.

Temporary Wage Subsidy (TWS)
The CRA released its 10 per cent Temporary Wage Subsidy Self-identification Form (PD27) for Employers in July. TWS is a three-month measure that allows employers to reduce the amount of federal, provincial or territorial tax owed to the CRA. 

The subsidy is equal to 10 per cent (or a lower percentage that the employer decides to claim) on remuneration paid from March 18 to June 19, 2020, up to $1,375 for each eligible employee and a maximum of $25,000 per employer. 

Most employers will need to file the PD27 and the CRA has provided additional guidance for common scenarios on its website. It also encourages claimants to submit PD27 Forms as soon as possible to avoid year end discrepancy notices.

If you are eligible for both TWS and CEWS, you will need to reduce CEWS claims by the amounts claimed under TWS for those pay dates in a specific CEWS claim period.

For full details on TWS reporting, eligibility and the application process see the government’s TWS page or the Reporting the TWS to the CRA page.

Canada Emergency Rent Subsidy (CERS)
Under the new proposed CERS, which will provide mortgage and rent support to qualifying businesses who have suffered a revenue drop due to COVID-19 until June 2021, up to 65 per cent of eligible expenses will be subsidized until Dec. 19, 2020. The subsidy is provided directly to tenants, while also supporting property owners. In addition, a top-up of 25 per cent is available for those businesses that must temporarily shut down due to a mandatory public health order. 

Applicants can make claims retroactively for the period beginning Sept. 27 and ending Oct. 24, 2020. More details will soon be released.

OTHER SUPPORT PROGRAMS

Canada Emergency Business Account (CEBA)
The application deadline for the CEBA, which provides interest-free loans to eligible businesses of up to $20,000, in addition to the original CEBA loan of $40,000, has been extended to Dec. 31, 2020. 

The expanded program now allows more businesses to access support, including those with fixed costs such as owner-operated small businesses without a payroll, sole proprietors receiving business income directly and family-owned corporations remunerating in the form of dividends rather than payroll. 

Half of additional financing received is forgivable if repaid by Dec. 31, 2022. 

Regional Relief and Recovery Fund (RRRF) 
The RRRF provides $1.5 billion to businesses and organizations in specific sectors, including manufacturing, technology, tourism, etc., that are key to regions and local economies and have not been able to access other support measures. 

Business Credit Availability Program (BCAP)
The deadline to apply for the BCAP which provides commercial credit and cashflow term loans for SMEs based on annual business revenues and to assist with operational expenses, has been extended to June 2021. Additional loan programs include the Mid-Market Financing Program and the Mid-Market Guarantee and Financing Program. 

Additional Support Measures 
Programs available also assist specific groups including Indigenous- and Black-owned businesses, women and young entrepreneurs and businesses operating in the territories.

Up to $306.8 million is being invested into interest-free loans and non-repayable contributions for First Nations, Inuit and Métis businesses. Meanwhile, $20.1 million has been allocated to Futurpreneur Canada to assist young entrepreneurs facing financial challenges and another $15 million added to the Women Entrepreneurship Strategy (WES) to assist female entrepreneurs. Additionally, businesses operating in territories and unable to handle operating costs will have access to $15 million in non-repayable support through the Northern Business Relief Fund (NBRF). 

Breaking new ground with its first-ever Black Entrepreneurship Program, the government is investing almost $93 million into the National Ecosystem Fund to help Black business owners access funding, capital, mentorship, financial planning services and training; a business loan fund in partnership with Canadian financial institutions and a knowledge hub that will collect data to help dismantle barriers to success and identify growth opportunities. 

Note: All information was accurate at time of publishing. Look to CPA Canada’s regularly updated COVID-19 resources page, including a compilation of tax updates, external resources and online news articles.

MORE COVID-19 UPDATES

Worried about another lockdown? Here’s how to prep your business amidst a second wave. Find out how to determine the value of a company during a pandemic and look for these telltale signs that your business is at risk of closure. Amid COVID-19, here’s how to prep your company for the next industrial revolution.