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Reopening, but not normal

Reopening, but not normal

We’re delighted that COVID restrictions are slowly being lifted. We also spare a thought for our friends and clients who are not yet released from Stage 1 – or those in businesses which aren’t unlocked until Stage 3. We hope those will both come soon…. and that things don’t move backward..

The move to Stage 2 lets many people re-open their businesses. We hope these thoughts may help you.

Starting point: What does your business look like?

Obviously the world looks different from 4 months ago. Your business may do, as well. We may be in Stage 2 – but it’s very clear that this is in fact NOT going to be “business as usual” for some time…. if ever.

Set aside the last few months. If you haven’t done so already, it’s time to map out how your revenues and costs will be affected in the long-term. You may have started new revenue streams which have different cost structures (online consulting, home delivery?). Or, your existing business may have less ability to generate revenue (social distancing between tables?) – so you need to think about the costs needed to provide your services.

We’re here to help. Please call if you’d like to talk.

CERB, CEWS and CEBA (all the “Canada Emergency…..” programs)

At the time of writing, the government has indicated that it will extend these programs beyond the original 3 months….. but we’re still waiting for the legislation to go through Parliament. Watch this space, as things may change…

CERB (Canada Emergency Response Benefit)

Many people had been furloughed by their businesses, or their hours significantly curtailed – so have been collecting $500 a week CERB.

If you’re back at work, your employer should now be paying you. If you’ve been brought back on shorter hours, recall that you can still earn up to $1,000 a month and still be eligible for CERB. If you’re earning more than that, you’re no longer eligible. It’s the individual’s responsibility to know when to claim, stop claiming or repay CERB – not your employer’s.

Also, please be careful with the dates of when you’re hired back, and how that interacts with your CERB payments. CRA has stated they’ll be cross-checking against payroll records at a future date. We encourage you to check out your status under “Determine if you are eligible” at https://www.canada.ca/en/services/benefits/ei/cerb-application.html.

CEWS (Canada Emergency Wage Subsidy)

From an employer’s perspective – it must feel good to have people back…. But you’re no doubt worried about being able to pay them. Fortunately the CEWS remains in place – although we don’t know if, when or how it will “taper off”. At the time of writing, we don’t know for sure how this will extend beyond early July.

If it is extended in close to today’s form…. many businesses will be able to re-open and generate some “real” revenue again – but with the government covering most payroll costs, at least for a while.

See earlier blog posts, but we note:

  • To be eligible, the criteria remains that you have to have suffered a 30% revenue hit, compared to your baseline period (normally, the same month in 2019). So, assuming nothing changes….. a business that re-opened this last week will likely be eligible based on June’s revenues.
  • If you are planning to claim the CEWS in Period 4 for rehired employees, it is important to note that employees who are not paid by you for a period of 14 consecutive days in the period (June 7 to July 4) their wages are not eligible. Details on eligible employees: (see “Who are eligible employees” https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-wage-subsidy/cews-determine-eligible-employees.html).
  • You can back-date hiring employees to meet the minimum period, for example back to June 21 if consistently working from “restart” to July 4th, but beware of interaction with CERB. Also, it is important to note some wages must be tied to the back-date hiring, not just on paper.
  • If you’re eligible in Period 4 (June revenues), then current rules suggest you’re automatically grandfathered into Period 5 – which covers payroll from the next four weeks from July 5. Good to know.

By now you’ve already worked out that this program is fairly generous, but absurdly complicated. Call us if you’d like help!

Canada Emergency Business Account (aka “$40k loan”)

In many cases, we were pleased to see how quickly this money landed in the bank account. But many businesses – especially those without structured payroll – are only now able to get access to that money.

We’ve heard anecdotally that the banks and credit unions are being more rigorous in their evaluation of “eligible non-deferrable expenses” – see the definition in https://ceba-cuec.ca/. We don’t know if or how this will be audited…. in the worst case, we assume you simply have to repay the money.

You can start to repay the loan from July 1 onwards. Many people hope to repay the first $30k, so the last $10k is forgiven. But – even if you have the money in hand – we encourage you NOT to cut the cheque next week:

We really don’t know what the future will hold. This money is intended to be medium-term cashflow support. Use it for that.

It’s not intended to be a $10k grant. Don’t abuse the system.

We suggest that you create a repayment schedule that will pay down the balance in time. Obviously this needs to reflect your cash flows, but either of the following will get you to $30k paid off by the magic date, December 31, 2022:

  • $1,000 per month, starting from July 1, 2020
    OR
  • $1,500 per month, starting from April 1, 2021.

Other things your government has done for you….

Previously announced extensions for deadlines / payments remain in place. Again, for corporate and income tax filings, it’s not a disaster if your return is overdue – so long as fully paid by September 1.

The government also reaffirmed that the extension on HST filings will expire tomorrow, as previously announced.

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I think that’s about it. Happy Canada Day to all. Let’s hope the 2nd half of 2020 is less weird than the first half.

Jules