Business owners – COVID-19 emergency support measures

Details available as of April 1, 2020
  

The economic impact of the COVID-19 pandemic is being felt widely throughout the business community and has prompted the federal government to propose several emergency support measures over the past few weeks. This content is intended to provide Business Owners with high-level details on the new measures.

The pandemic situation continues to move quickly, and some of the details here may fall out of date. This content reflects our understanding as of April 1, 2020. You can refer to the Government of Canada website for further information.

The federal government’s proposed measures are intended to achieve three goals:

  1. Allow businesses to bring employees back on staff through the Canada Emergency Wage Subsidy (CEWS)
  2. Allow workers who have lost their jobs to receive access to funds through the Canada Emergency Response Benefit (CERB).
  3. Allow businesses to obtain credit needed to continue operations through the Canada Emergency Business Account (CEBA).

Canada Emergency Wage Subsidy (CEWS)

The proposed CEWS is Canada’s largest direct support program. The government has estimated the cost of the CEWS to be $71 billion.

Amount

Employers who are eligible for the CEWS will have 75% of their employees’ regular salaries and wages covered by the government. Per employee, the 75% subsidy will apply to the first $58,700 of remuneration. The maximum subsidy per employee is $847 per week. The CEWS program will be in place for a 12-week period between March 15, 2020 and June 6, 2020.

Eligibility

The CEWS will apply to employers of all sizes, whether incorporated or unincorporated (i.e., individuals and partnerships), as well as non-profit organizations and charities; however, public sector entities are not eligible. Notably, the number of employees in the business is irrelevant in determining eligibility, and there is no total cap on the subsidy per employer.

A business will be eligible for the CEWS if its gross revenues have decreased by at least 30% in March, April, or May 2020, compared to the same month in 2019. Revenues for the CEWS are revenues from the employer’s business carried on in Canada earned from arm’s length sources. Businesses will have to reapply each month.

Example: In determining whether a business is eligible for the CEWS for the March 15, 2020 to April 11, 2020 claiming period, it will have to compare its gross revenue in March 2020 against its gross revenue in March 2019.

How to apply

Businesses can apply online through a portal from the Canada Revenue Agency (CRA) which is expected to launch in 3-6 weeks (from April 1, 2020). The application process will require businesses to prove that their gross revenues have decreased by at least 30%, that they are currently paying their employees remuneration, and are doing everything they can to make up the 25% not covered by the CEWS. If accepted, the CRA will then pay the CEWS to the employer. The CEWS is government assistance and is taxable to the employer.

Example: A business that meets the gross revenue test also needs to actually pay their employees first from their own (or borrowed) funds. It is expected that regular payroll processing (e.g., income tax, CPP, EI withholdings) continue. Once payments to employees are proven to the CRA through the application, the business will then be entitled to receive the CEWS.

It is recommended that businesses set up direct deposit with the CRA as soon as possible so that they can receive the CEWS quickly, once it becomes available. The government has indicated that they are planning to make funds available in approximately 6 weeks.

Details still to be determined

Many details on the CEWS remain outstanding, and the final provisions will still need to be enacted into legislation. We encourage affected businesses to monitor the Government of Canada website for updates.

Outstanding questions on the CEWS include, but are not limited to, the following:

  • Can shareholders of a corporation who work in the corporation’s business qualify for the CEWS if they have historically only paid dividends to themselves rather than salaries?
  • How does a business qualify for the CEWS where it is unable to easily compare a month’s gross revenues against gross revenues from the same month in 2019 (e.g., start-up companies or newly established companies)?
  • How does a business show to the CRA that they are doing everything they can to make up the 25% of wages not covered by the CEWS?
  • What are the penalties that could apply if businesses try to abuse the CEWS?

Note: At this time, the government has indicated that businesses that do not qualify for the CEWS may continue to qualify for the previously announced Temporary Wage Subsidy for Employers, which subsidizes 10% of remuneration paid from March 18, 2020 to before June 20, 2020 up to a maximum subsidy of $1,375 per employee and $25,000 per employer. This particular subsidy, unlike the CEWS, is essentially “received” by a business through reductions in required income tax remittances from employee remuneration.

Example: An employer may be disqualified from the CEWS because its gross revenues did not decrease by at least 30%. However, the employer may be able to instead claim the Temporary Wage Subsidy for Employers. The government has advised that any benefit received under the Temporary Wage Subsidy for Employers would reduce the amount available for the CEWS in the same period.

Canada Emergency Response Benefit (CERB)

Amount

The CERB, which provides a taxable benefit of $2,000 a month for up to 4 months for individuals who are unable to work due to COVID-19, have lost their jobs, or are not eligible for EI, will continue to be available. The estimated cost to the economy of the CERB is $24 billion.

The CERB is available from March 15, 2020 until October 3, 2020. Eligible individuals will have to apply for the CERB on a monthly basis.

Eligibility

Eligible individuals include the following:

  • Workers who must stop working due to COVID-19 and do not have access to paid leave or other income support
  • Workers who are sick, quarantined, or taking care of someone who is sick with COVID-19
  • Working parents who must stay home without pay to care for children that are sick or need additional care because of school and daycare closures
  • Workers who still have their employment but are not being paid because there is currently not sufficient work and their employer has asked them not to come to work
  • Wage earners and self-employed individuals, including contract workers, who would not otherwise be eligible for Employment Insurance

Notably, it appears that at this time, shareholders of a corporation who work in the corporation’s business will not qualify for the CERB if they have historically only paid dividends to themselves rather than salaries.

Interaction of the CERB with the CEWS

Employers are not able to claim the CEWS for remuneration paid to an employee that falls within a 4-week period for which the employee is eligible for the CERB.

How to apply

Applications for this benefit will be available starting April 6, 2020. Taxpayers are encouraged to set up their online “CRA My Account” as soon as possible and signing up for direct deposit so that they can get the CERB more quickly. The government has indicated that direct deposit payments are estimated to come within 3-5 days of applying, while payments via mail will take 10 days.

Canada Emergency Business Account (CEBA)

The CEBA will provide loans of up to $40,000 to qualifying small businesses and non-profit organizations. These businesses will have to verify that they paid between $50,000 to $1 million in total payroll in 2019 to qualify. Other key details include the following: The CEBA is interest-free for the first year; Up to 25% ($10,000) of the loan may be forgivable under certain conditions; The CEBA will be provided through financial institutions. The government has announced that it will provide more information on the CEBA in the weeks after March 27, 2020.

Deferral of GST/HST payments

Businesses, included self-employed individuals, are now able to defer GST and HST payments until June 30, 2020. It is unclear whether this deferral extends to the actual filing of the GST and HST returns.

Income tax filing deadlines and payment due dates

The CRA has published the following schedule summarizing revised due dates for income tax filings and payments. We recommend that you check this page if further changes to due dates are announced.

Here is a summary. All businesses can defer until after September 1, 2020 the payment of income tax payments (instalments and balances due under Part I of the Income Tax Act) that become owing between March 18, 2020 and before September 1, 2020. No interest or penalties will accumulate on these amounts during this period. Note that the filing deadline for corporate tax returns has not yet been extended—it remains no later than six months after the end of the taxation year.

Tax audits and assessments will halt temporarily. The CRA will not contact any small or medium business to start any post-assessment GST/HST or income tax audits for the next four weeks (from March 18, 2020). The CRA will also temporarily suspend all audit interaction with taxpayers and representatives. The CRA will customize information services to ensure that small business are aware of any changes such as filing and payment deadlines and relief measures.
 


Government of Canada website

As measures continue to be announced and refined, we recommend that you also monitor the government’s website to obtain the most up-to-date information on the economic response to COVID-19.
 


Support for your employees

The COVID-19 pandemic has left many small businesses in Canada with no choice but to cut hours or close down entirely and in many cases lay off staff, leaving countless individuals and families in a precarious financial situation. We have compiled the following list of new measures as a quick reference to help any of your employees who require additional financial support during this challenging time. For more information and to apply for the subsidies, please visit the Government of Canada website.

Canada Emergency Response Benefit (CERB)

The CERB, which provides a taxable benefit of $2,000 a month for up to 4 months for individuals who are unable to work due to COVID-19, lost their jobs, or are not eligible for EI, will continue to be available. The CERB is available from March 15, 2020 until October 3, 2020.

The government will make the application for the CERB available on its website in early April. Workers can also apply via phone. CERB payments are expected to be made around 10 days after application.

Who may be eligible: 

  • Workers who must stop working due to COVID19 and do not have access to paid leave or other income support
  • Workers who are sick, quarantined, or taking care of someone who is sick with COVID-19
  • Working parents who must stay home without pay to care for children that are sick or need additional care because of school and daycare closures
  • Workers who still have their employment but are not being paid because there is currently not sufficient work and their employer has asked them not to come to work
  • Wage earners and self-employed individuals, including contract workers, who would not otherwise be eligible for Employment Insurance
  • For more information – visit the Government of Canada’s website.

Other EI relief

  • The Federal Government has removed, for at least six months, the one-week waiting period for individuals in imposed quarantine that claim EI sickness benefits. This temporary measure will be in effect from March 15, 2020 (announced on March 11, 2020). 
  • The requirement to provide a medical certificate to access EI sickness benefits has also been removed.

Longer-term support: Workers at risk of losing their jobs

  • The government is introducing an emergency support benefit delivered through the Canada Revenue Agency starting in April 2020 to provide up to $5 billion in support to workers who are not eligible for EI and who are facing unemployment. 

Goods and Services Tax Credit (GSTC) and Canada Child Benefit (CCB): Low-to-modest income families

For over 12 million low and modest-income families, who may require additional financial assistance, the Government is proposing to provide a one-time special payment by early May 2020 through the GSTC. This will double the maximum annual GSTC payment amounts for the 2019-2020 year. The average boost to income will be close to $400 for single individuals and close to $600 for couples. This measure will inject $5.5 billion into the economy. 

For over 3.5 million families with children, who may also require additional support, the government is proposing to increase the maximum annual CCB payment amounts, only for the 2019-2020 year, by $300 per child. These families will also receive an extra $300 per child as part of their May payment.

Together, the proposed enhancements of the GSTC and CCB will give a single parent with two children and low to modest income nearly $1,500 in additional short-term support.

Other measures: Vulnerable groups

To ensure that certain groups who may be vulnerable to the impact of COVID-19 have the support they need, the government is proposing targeted help by:

  • Reducing required minimum withdrawals from Registered Retirement Income Funds (RRIFs) by 25% for 2020, in recognition of volatile market conditions and their impact on many seniors’ retirement savings. This will provide flexibility to seniors who are concerned that they may be required to liquidate their RRIF assets to meet minimum withdrawal requirements. Similar rules would apply to individuals receiving variable benefit payments under a defined contribution Registered Pension Plan. 
  • Providing $305 million for a new distinctions-based Indigenous Community Support Fund to address immediate needs in First Nations, Inuit, and Métis Nation communities.
  • Placing a six-month interest-free moratorium on the repayment of Canada Student Loans for all individuals currently in the process of repaying these loans.
  • Providing the Reaching Home initiative with $157.5 million to continue to support people experiencing homelessness during the COVID-19 outbreak. The funding could be used for a range of needs such as purchasing beds and physical barriers for social distancing and securing accommodation to reduce overcrowding in shelters.
  • Supporting women and children fleeing violence, by providing up to $50 million to women’s shelters and sexual assault centres to help with their capacity to manage or prevent an outbreak in their facilities. This includes funding for facilities within Indigenous communities.

Mortgage default management tools

The Canada Mortgage and Housing Corporation (CMHC) and other mortgage insurers provide more flexibility for lenders to postpone mortgage payments associated with government-insured mortgages for borrowers experiencing financial difficulties due to the pandemic. Insurers will now allow lenders to authorize deferred payments. 

Individuals & trusts – COVID-19 emergency support measures

As part of measures to help Canadians manage through the COVID-19 pandemic, the Federal Government introduced numerous proposals. Here is a breakdown of key measures.

Read more.

We continue to serve you

Andrew Marsh, President & CEO of Richardson GMP has written a message to clients to inform them of the measures our firm is taking in response to COVID-19 to prioritize the health and safety of our Clients, Advisors and all Employees.

Read more.