Federal Pandemic Benefits Summary – Help for Businesses

Evelyn Jacks & Beth Graddon

The pandemic has had a significant economic impact. Here’s a summary of the major pandemic response benefits extended by the federal government to help businesses weather the storm.

Canada Emergency Wage Subsidy (CEWS)

The federal government extended its Canada Emergency Wage Supplement (CEWS) until August which makes the program available for up to 24 weeks, retroactive to March 15, 2020. The program covers 75% of employee wages for eligible employers (less any 10% temporary wage supplement received) up to $847 per week. As of July 6, 2020 581,800 applications have been approved by the government with $18.01 billion in subsidies paid.

To apply, an application must be submitted for each eligibility period.

CEWS Claim Periods

Eligible Employers

These include individuals and trusts, taxable corporations, non-profits, agricultural organizations, boards of trade and chambers of commerce, labor organizations, registered charities and partnerships that include eligible employers.

Revenue Decline Test

Eligible employers must meet a specific revenue decline test.  This begins with a base line period. The baseline period is either the revenue earned in a corresponding month in 2019 or the average revenue earned in January and February of 2020.

CEWS Paper Trail

The CRA is recommending that businesses remain audit-proof with the following required documentation:

• The CEWS must be included on your Annual Return of income, as it is a taxable benefit.
• The amount of the CEWS used to pay each employee’s salary must be recorded on their T4 slips under a special code. The government will release more information on this before the end of the year.

EI, CPP, QPP and Quebec Parental Insurance Plan Premium Refunds for Employers

When applying for the CEWS, employers will also be able to apply for a new refund of 100% of the employer-paid contributions to these plans. Employers must continue to deduct and remit these premiums for employees who are on paid leave and for whom the CEWS is being collected for.

• Who is considered to be on paid leave?  This is an employee who is paid for the whole week but is not able to perform any work because the business is unable to open due to COVID-19. 

• Who is not?  People who are on leave with pay for only a part of a week – no refund of premiums is available in this case. 

10% Temporary Wage Subsidy for Employers – Now Expired

A payroll remittance reduction of 10% of wages paid March 18 to June 19 (3 months), up to $1375 per employee or $25,000 per employer. The first of such relief will occur with the April 15 remittance. This subsidy wad made available to eligible employers regardless of revenue loss and it is taxable.

Claim the reduction against the income tax remittances owing to CRA. The wage subsidy cannot offset the Canada Pension Plan (CPP) contributions, and Employment Insurance (EI) premiums. If income tax remittances are fully offset by the value of the subsidy, future payroll remittances can be reduced by the excess even if they fall outside the application period, which ends June 19, 2020.

Keep all documentation to back up the claims, including:

• Total remuneration paid from March 18, 2020 to June 19, 2020
• Federal, provincial, or territorial income tax deducted from that remuneration
• The number of eligible employees paid in that period

Canada Emergency Business Account (CEBA)

On April 16, 2020 the federal government announced that the payroll threshold for businesses qualifying for the Canada Emergency Benefit Account (CEBA) has been reduced from $50,000 to $20,000 and increased at the upper end from $1 million to $1.5 million.

This left small businesses out of the equation, and on June 26 the program was finally expanded again as promised in May. It’s now available to qualifying sole proprietors, or businesses with payroll lower than $20,000, with eligible non-deferrable expenses between $40,000 and $1.5 million to apply for interest-free, partially forgivable loans of up to $40,000.

If the loan is repaid by December 31, 2022, 25% of it – up to $10,000 – will be forgiven.  It’s a $25 billion program offered through financial institutions in co-operation with Export Development Canada (EDC).

There is no specific criteria on how much your revenues have to decrease to qualify for this program. However, initially, like many of the other pandemic benefit programs, loans were being issued prior to verification. Applications will now be processed and verified before loans are issued.

How to get the CEBA:  Loan candidates will need to apply to their financial institution and meet four basic criteria to qualify.

• The business. Yours is a Canadian operating business in operation as of March 1, 2020 with a federal tax registration and you intend to continue to operate this business or resume its operations.
• The payroll. You paid total employment income between $20,000 and $1,500,000 in the 2019 calendar year.
• Small business payroll. You paid total employment income under $20,000, with eligible non-deferrable expenses between $40,000 and $1.5 million.
• The relationship with the financial institution. You have an active business chequing/operating account with the Lender, your primary financial institution, having been opened on or prior to March 1, 2020. You must not be in arrears on existing borrowing facilities with this lender by 90 days or more as at March 1, 2020, and will not have previously used this program or applied for support under this program with any other financial institution.
• Follow-up. You must agree to participate in post-funding surveys conducted by the Government of Canada or any of its agents.

Who is ineligible?  You won’t qualify if you are a government organization, body or entity owned by either. Neither will a union, charitable, religious or fraternal organization registered or owned by one, or if so, it is a registered T2 or T3010 corporation generating some revenue from the sale of goods or services. 

Additional educational resources: Join us live, online at The Meeting of the Minds July 9 at 11:30 EST. This free event is of special interest to advisors in the tax, accounting, bookkeeping, legal and financial services. Join a virtual, national conversation to discuss key issues of concern in overcoming financial obstacles using a Real Wealth Management™ Framework. Evelyn Jacks will also be providing a live overview of this federal Economic Snapshot.

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