We hope you remain safe. Clearly, we’re all concerned with the resurgence in COVID cases, that have required our governments to tighten controls again. Fingers crossed for that vaccine.
There have been numerous updates and changes to the benefits available – most recently, an updated federal package that passed into law on November 19.
Here’s a round-up. Sorry if some of the material for individuals is not brand new – we’ve been waiting for the federal package to pass before we posted.
The universe of acronyms has now expanded. We now have CEWS, CRB, CRSB, CEBA, and CERS. Not to forget EI and Lockdown Support. We won’t mention TEWS, CECRA, CERB because those schemes have finished and don’t matter anymore.
Another long post, but you can read this one a-la-carte. As always, we try to go beyond a summary of the facts and point out what it may actually mean to you.
Federal programme: continued evolution.
The Canada-wide programmes continue to be the main ones available to individuals and families. Provincial governments just don’t have the firepower.
You’re probably aware that CERB (Canada Emergency Response Benefit) ended in September. That net was cast wide, which made sense – no time to design a detailed scheme, just need to get support to anybody hit by COVID, as fast as possible.
It’s been replaced by an assortment of other schemes: a modified EI, and three new COVID-related ones. (See https://www.canada.ca/en/services/benefits/covid19-emergency-benefits.html – this also takes you to links on how to apply.)
Before commenting on each, here are some overview points:
- The schemes are mutually exclusive. You can only be on one at a time. The going rate for COVID-related benefit is $500 a week, pre-tax (see below).
- They each require you to re-apply every period – typically every two weeks. You have to do this after the period has ended. Although the government is pretty quick at getting money out, that adds to the financial strain that a household may be facing.
- Note that the government only pays you $450 of the $500 weekly amount – the $500 is considered taxable income, so they hold back 10% as an advance payment on the resulting taxes. It’s unlikely to cover all the taxes due on that amount. Be prepared for a nasty tax return surprise next April. And you’ll get a T-slip from the government, so don’t think you can “forget” to declare it.
Getting more specific:
- CERB was closed in late September, although you still have until Dec 2 to file a late application if you haven’t yet done so. Those who were on CERB either went into the modified EI program, or the new CRB.
- EI has not changed dramatically, but the eligibility criteria have been relaxed a bit. Be aware that you will need an ROE from your employer. [This may cause a bit of difficulty – many employers who did not formally lay off their staff may not have issued them]. If you were on CERB, in most cases you will have been automatically migrated into the “new” EI.
- The CRB (Canada Recovery Benefit) is essentially CERB for people who can’t get EI (eg. those who are self-employed). A good thing, but there are a couple of nasty things to be aware of.
- If your net income for the year (including any benefits other than CRB) exceeds $38k, you will have to repay half of every dollar you get from CRB, potentially until it’s all gone. So, let’s say you owned a business that made you $55k from January to September…. but you finally had to close the doors on October 1. Being self-employed, you weren’t eligible for EI, so you claim $7k in CRB before the end of 2020. Because of how much you made in the first nine months, you’ll suffer clawback of the entire CRB benefit you received. You’ll have an unexpected $7k bill when you file your tax return. You may still suffer a tax clawback in 2021 – but only if your income recovers.
- The CRB is structured in 2-week blocks – but you can only claim in a maximum of 13 of the 26 blocks available through next year. After that, you’re done. If you are out of work over the winter, your benefits are done by early Spring. Fingers crossed for those vaccines.
- Putting these things together…. If you’re over the $38k threshold in 2020, you don’t expect your business to come back, but you can handle six more weeks without cash – then don’t claim until 2021. You will still likely be able to claim the max $13k available – but if you wait until 2021, you won’t suffer the clawback. Unless your income recovers. Which would be good.
- One minor change that we like: CERB assumed your other income had been knocked down to no more than $1,000 per month. That’s been changed to a reduction of 50% or more in your pre-COVID income.
- The CSRB (Canada Recovery Sickness Benefit) covers you for 2 weeks at $500 a week. Note that it also covers you if you can’t work because you have been told you have to self-isolate.
- The CRCB (Canada Recovery Caregiving Benefit) is exactly what it sounds like. The same $500 a week, but to be claimed by somebody who’s not working because they’re caring for somebody who’s sick, high risk, or self-isolating – or kids who have to stay home.
- I haven’t seen the detail of exactly how this works…. For example, what if one spouse has to stay home because of a COVID outbreak at their work, and they’ve been told to self-isolate…. this seems to imply that their healthy spouse gets to stay home as well. The guidance is not clear…our take would be that this does not apply unless your spouse is actually sick and requires you to be home to provide care. That would be consistent with the rest of the scheme.
- I’m not exactly sure exactly how CRA will validate if your kids’ school or daycare has been closed – the honour system? Lots of googling by CRA agents?
- Only one person in each household can claim each week, regardless of how many people need caring for.
The main programs continue to be wage and rent subsidies.
There are also some funds available to help businesses cover the costs of having to spend money on PPE. See https://occ.ca/canada-united-small-business-relief-fund/ for a programme from Canada United (potentially $5k available), and near the end of this post for an Ontario scheme ($1k). I’m sure any help will be gratefully received.
CEWS (Canada Emergency Wage Subsidy)
Please see the previous blog post if you need a refresher.
CEWS remains fundamentally unchanged, except that the program’s been extended through next summer. That also means that it’s not being tapered down over time, as previously explained. However, the amount of subsidy you get does continue to depend on how badly you’ve been hit by COVID.
There have also been some minor tweaks to the maximum benefit payable – mainly to make sure that there’s no difference between whether an employee is paid to stay home, and the employer is reimbursed under CEWS; or whether the employee stays home and collects EI or CRB.
We continue to support our clients with CEWS filings. If we haven’t already talked to you about this program, please call us.
CERS (Canada Emergency Rent Subsidy)
This is a complete overhaul of the now-defunct CECRA (Canada Emergency Commercial Rent Assistance). That program shared the pain between tenant, landlord and government – but landlords were under no obligation to sign up to the program. Many didn’t, meaning poor takeup and limited benefit.
For the most part, we like these new changes. Landlords can rest easy. They don’t have to do anything extra. The tenant pays as usual (or based on a revised agreement), then gets reimbursed by the government.
The government has been smart and has aligned the mechanics of this program to CEWS:
- Both schemes are now sensitive to need. The worse COVID has hit the tenant, the more support the tenant gets. In fact, the eligibility criteria, calculation methods, and percentages are exactly the same with CERS and CEWS. And you apply through the same portal.
- Both programs run through June of 2021.
- Both offer the same %age of relief of relevant expenses, to a maximum of 65% (see more info below).
In this case, the relevant expenses are commercial rent (not residential), property taxes, insurance, and mortgage interest (NOT mortgage principal). The property must be in Canada, and the rent must be paid to a third party. That means that Company A can’t pay rent to its parent Company B, which owns the building (so, you can’t claim it on rent paid to another company you own). Makes sense.
Be aware that there is a cap on the eligible expense for which you can claim relief: $75k per month per location, and $300k per month per group of companies. That should cover many businesses.
In addition, CEWS has an additional 25% support for those who have been particularly badly hurt. The same applies here – there’s an extra 25% “Lockdown Support”.
- This is a good thing – but please note that it only applies if you’ve had to close your doors, or cease some of the things you do at the affected location, due to a COVID-related public health restriction. It’s not revenue-dependent. We find this a bit arbitrary.
- For example, it applies if you can no longer offer indoor dining, or have to close your gym. Even if you’re still offering take-out or workouts via Zoom. But, if you’re still doing the same thing but on 50% capacity…. bad luck.
- Devil’s in the details. See https://www.canada.ca/en/department-finance/news/2020/11/lockdown-support-for-businesses-facing-significant-public-health-restrictions.html
One thing we don’t like: The unlamented CECRA was a direct help to small businesses ’ cashflows – it reduced what they had to payout. Under CERS, the business has to pay the rent and then reclaim. That said, we’ve found that CRA has been commendably prompt in confirming and paying CEWS claims. We hope the same will apply to CERS.
We didn’t get involved much in CECRA claims, because that was between tenant and landlord. However, if we’re talking to you about CEWS, we should probably discuss CERS as well. Call us.
CEBA (Canada Emergency Business Account)
This is the $40k interest-free loan, of which $10k is potentially forgivable. Available via your bank or Credit Union.
The government has further relaxed the limits on who can claim – there were still some businesses (especially not incorporated) that were barred for arbitrary reasons. Things are better, but you still need to demonstrate that you have at least $40k in relevant expenses.
Word on the street is that the scheme will be expanded to offer another $20k, of which $10k is potentially forgivable. We don’t know much about this plan yet, but we’ve heard that eligibility will be more COVID-dependent than the first $40k. Stay tuned.
If you’re still with me…. here’s a quick view of what Ontario offers. Some programs have closed, but these remain in place:
- Emergency assistance for households – up to $733/mo – https://www.ontario.ca/page/apply-emergency-assistance
For businesses – see https://www.ontario.ca/page/businesses-get-help-covid-19-costs. This covers:
- Rebates for businesses affected by lockdowns or regional restrictions – grants to reimburse for municipal taxes; energy costs. Not clear how much.
- Up to $1k reimbursement on spending on PPE for small businesses (2-9 employees), on proof of receipts.
- The EHT is an extra tax that (nominally) funds OHIP. It’s charged at up to 2%, on payroll over an exemption limit. The exemption limit has been permanently increased from $490k to $1m. So, if your payroll is $1m, then that saves you nearly $10k in EHT.
- See https://budget.ontario.ca/2020/marchupdate/annex.html#section-3. If you spend money on buying or renovating a commercial property, the Ontario government wants to give you up to $45,000 when you file your corporate tax return. Note, you need to be in a qualifying area (which includes Windsor/Essex County). Call to discuss!
And for those of our clients whose businesses reside in British Columbia, the following programs and deferrals are available:
BC Emergency Benefit for Workers
- One-time, tax-free payment of $1,000 to B.C. residents whose ability to work has been affected by COVID-19. Available until Dec 2nd
- “Restart Programs” to encourage business growth will be available in early 2021
- Small and Medium-Sized Business Recovery Grant
- $10,000-$40,000 grants available
- Detailed eligibility criteria surrounding losses due to COVID-19, length of operations (https://www2.gov.bc.ca/gov/content/economic-recovery/business-recovery-grant )
- Small and Medium-Sized Business Recovery Grant
- PST rebate on Select Machinery and Equipment
- Certain classes of capital assets are eligible to reclaim PST to support growth
- Must be purchased between Sept 17, 2020 and Sept 30, 2021
- Increased Employment Incentive
- 15% refundable tax credit for all private-sector employers to encourage job creation in Q4 for 2020.
- Qualifying B.C. remuneration is the total B.C. remuneration paid to eligible employees for the quarter ending December 31, 2020, with a maximum weekly B.C. remuneration for each eligible employee of $1,129.33.
- Payment deferrals available through
- BC Hydro
So…. Still difficult times, but there is support out there (and a glimmer of hope that the end may be in sight). Hope this all makes sense. Please call if you’d like to discuss.