Covid 19 Stimulus Programs
Please note that there have been numerous other small updates and changes to the CEWS and other programs. The purpose of these letters to clients is only to describe, in broad strokes, the programs so that they may contact us for further analysis and advice on which programs may apply to them. The below is only meant to begin a discussion and should not be relied upon to make your own applications for Covid Relief without further assistance from a professional. We are happy to provide this assistance to our clients.
Canada’s COVID 19 Economic Response Plan
Covid relief update November 22, 2020
The bill C-9 received royal assent on Friday and Trudeau has announced applications will open on Monday for this new program. We still do not have all of the details yet but I wanted to give you an overview of the program. The following is my own understanding of the program based on preliminary information and does not constitute advice which can be acted upon without further consultation. If you would like me to look into an application for your company please let me know.
The new and improved rent subsidy – CERS
This new program can be applied to directly be business owners without needing the approval of their landlords. Relief will be based on a sliding scale depending on how much their revenue has dropped each month.
What periods can we apply for?
The program applies on rent from September 27, 2020 – June 2021. – We assume this means that October 2020 will be the first month of rent that can be subsidized.
How do we calculate the subsidy?
- If your revenue loss is 50% or less it is 80% x the revenue loss for the period (ie. October). Max is 40% of your rent paid.
- If your revenue loss is more than 50%, you get 125% x the loss greater than 50% to a max of 25% plus the max from above. Total max would be 65% of rent paid.
- If your business is forced to shut due to a public health order you are eligible for an additional 25% top up. Combined with the max from above you would be eligible for a subsidy of 90% of the rent paid for that period.
We have very few details beyond the above, but it is my understanding that the application process will be through CRA similar to the wage subsidy program. They have not stated what documentation if any is required, but I imagine they will accept the application and send out the money then do a randomized audit of a small percentage to ask for documentation of rent paid and revenue declines.
I hope this program will help the many small businesses that are struggling out there. We will get through this together!
Covid relief update October 13, 2020
On Friday the Federal Government outlined some new programs (and expansions to programs).
They did not lay out all of the details but here is what we know so far in a nutshell:
- A new and improved rent subsidy – the new CECRA
This new program can be applied to directly be business owners without needing the approval of their landlords. Relief will be based on a sliding scale depending on how much their revenue has dropped each month. The program applies on rent from September 27, 2020 – June 2021.
- CEWS wage subsidy extended until June 2021.
- CEWS wage subsidy rates increased back up to 65% until December 31, 2020. Plus there will be an additional 25% top-up if your business if forced to close by a public health order.
- An expanded CEBA loan
The loan will now be a total of $60,000. If you received $40K you can apply for an additional $20K.
Of the $60,000, now up to $20,000 will be forgivable
The application date for this program has also been extended until December 31, 2020.
If you think the above may help your organization please stay tuned for when details are finalized and then contact me with any questions you might have.
CEWS Update July 22, 2020
Yesterday the house passed the new changes to the CEWS wage subsidy program. They are expanding and extending the program until December 19, 2020.
The new program is far more complicated than the old program, but does offer subsidies to businesses that have seen even a modest 1% revenue drop. As always details are not fully fleshed-out but I want to give you the broad strokes. The following should be used as discussion points and not relied on to file for the subsidy as details may change or be miscommunicated.
Here are the relevant details:
- For August if you would receive more money under the old program (75% subsidy for a 30% revenue drop) then you can continue under those rules until August 29, 2020.
- If your company had a revenue drop compared to the same month in the prior year (or average of Jan-Feb if a new company) you will be subsidized as follows:
a. For every 1% drop in revenue you will receive a subsidy of 1.2% of wages paid. If you had a 10% drop you would receive a 12% subsidy of wages.
b. If your revenue has decreased more than 50% you will receive the maximum 60% subsidy (however you would just apply under the old program up to August 29th and get 75% subsidy).
c. The maximum base subsidy of 60% will decrease each period so that in September the max is 50%, October 40%, November is 20% etc.
d. There is a further CEWS top up for companies with a 3 month revenue drop of 70% which would essentially add 25% to the maximum base rate assuming revenues were down at least 50% for the month. This means that if your business had a revenue drop of 70% for the last 3 months and was down 50% in the current month you could receive the maximum 85% wage subsidy.
This morning there were more announcements with 3 items that are particularly important to small businesses and their employees.
I’ve highlighted all new info below for ease of reading, followed by the details that I have sent out before on April 8th. If you find these updates useful please leave us a review on Google or Facebook even if you are not a client. It goes a long way to help my business through this pandemic which is a difficult time for all of us.
New items as of this morning April 16, 2020
- The CEBA interest free bank loans now have a lower threshold. You now only need to have paid $20,000 in wages in 2019 in order to qualify and can apply through online banking with just your business number and T4 summary box 14.
- The CERB ($2k/month benefit) will now be paid even to individuals who are still working but not earning more than $1,000 per month.
- Rent Assistance (CERCA) – this is a newly announced program in which the government will provide loans to commercial property owners in return for reducing or waiving rent from small businesses in April-June. No significant details were provided as it will require cooperation with Provincial governments.
New details as of April 8, 2020
- Banks are starting to take applications for the interest free loans tomorrow morning, so get in online as early as possible. You are competing with all those out East!
- The government has announced new methods of calculating the drops in revenue in regards to the 75% wage subsidy. See below for the highlighted details.
- There are more details on a wage subsidy flow-through for employers who cannot afford to hire back staff even with the 75% subsidy. See below for highlighted details.
CERB – CANADA ECONOMIC RESPONSE BENEFIT
The Federal government has combined their previous ideas on additional EI benefits into one benefit available to all wage earners and self-employed people including those who would not otherwise qualify for Employment Insurance:
- The benefit is $2,000 per month for anyone that earned at least $5,000 in the past year.
- Payments of the benefit should be processed within 3-10 days of application and paid every 4 weeks.
- Applications opened starting April 6 depending on which month you were born. You can apply via your MyCRA account online or through an automated telephone services 1-800-959-2019.
The benefit will be available to workers:
- Residing in Canada, who are at least 15 years old;
- Who have stopped working because of COVID-19
- Who had income of at least $5,000* in 2019 or in the 12 months prior to the date of their application
- Who are or expect to be without employment or self-employment income for at least 14 consecutive days in the initial four-week period. Once receiving the CERB they are allowed to earn up to $1,000 per month before losing this benefit. The details on this new rule are scant but will be fleshed out soon.
*The income of at least $5,000 may be from any or a combination of the following sources: employment; self-employment; maternity and parental benefits under the Employment Insurance program. The amount of $5,000 includes gross (not net) self-employed income and foreign earnings as long as still a Canadian Resident.
The Benefit is only available to individuals who stopped work as a result of reasons related to COVID-19. If you are looking for a job but haven’t stopped working because of COVID-19, you are not eligible for the Benefit.
GST TAX CREDIT
One extra GST payment in early May 2020 = the amount normally received in a year, doubling the amount of GST amounts received for the 2019-20 benefit year.
CANADA CHILD BENEFIT
They will pay an additional $300 per child as part of the regular May payment.
PERSONAL TAX FILING & PAYMENT DEADLINES
- Personal tax – June 1, 2020
- Trust returns – May 1, 2020
- Income tax payments due August 31, 2020
- CEWS – The 75% wage subsidy
- All employers except those in the public sector (government funded) are eligible. The 75% is based on the wages actually paid to employees.
- This applies on a month by month basis for March, April and May.
- The criteria for March will be adjusted to a revenue reduction of only 15% in March 2020 over March 2019.
- How it works – If your revenues for March 2020 were 15% less than March 2019 you qualify for the subsidy for payroll paid March 15th – April 11th. For April and May your revenues will have to drop by 30% compared to the same month in 2019 unless using the alternate method below.
- For all employers there will be an option to compare revenues in each month to the average of January and February 2020. The employer must choose one method for all 3 months.
- For all employers there will be an option to use the cash basis to calculate drops in revenue. Similar to above the employer must choose one method to use for all 3 months.
- The maximum subsidy is $847 per employee per week for up to 12 weeks from March 15 – June 6, 2020.
- The amount paid by government is the greater of:
o 75% of the employee’s pre-crisis weekly remuneration or 75% OR
o 75% of the amount paid to the employee for each week
- This subsidy would then be included as income to the employer company, so income tax will be paid on it in future.
Wage Subsidy flow-through – essentially using employers to provide EI
- For companies who have laid off staff and are unable to rehire them even with the 75% subsidy, the government would like them to act as a flow-through to rehire the employee and pay them 75% of pre-crisis wages to be reimbursed by the government. The employer would then also be refunded any employer payroll taxes on these wages. This would only apply to employees who are not doing any work for the employer for the entirety of the week for which wages are paid.
- The benefit to employers is that their staff get 75% of their pre-crisis wages and do not need to go on EI which would only pay 55% of pre-crisis wages. This would help with staff retention and help put more money into the pockets of their employees. However; details are still sketchy and it may well be that the employer would have to front the cash so to speak and then depend on the government to repay them in good time.
- Employers would still need to remit payroll taxes which would later be refunded by the government.
2. Small Business Loans
- A new program has been launched to provide interest free loans of up to $40,000 for businesses with 2019 payroll between $10,000 and $1,500,000.
- If your business is able to repay the loan by December 31, 2022 they will forgive 25% of the loan. For example; if you are able to pay back $30,000 of the $40,000 loan you will not have to repay the remaining $10,000.
- Certain banks (ex. CIBC) are opening up online applications tomorrow April 9th so get in your applications early!
3. The 10% wage subsidy program
- This subsidy can be applied against wage remittances made for March 18th until June 19th.
- If you use this subsidy it is deducted from the amount of the 75% wage subsidy receivable.
- The subsidy only reduces the amount of income tax remittances not EI or CPP.
- The subsidy is 10% of the gross wages paid up to $1,375 per employee up to $25,000 per employer.
4. All businesses can defer all income tax payments and instalments until August 31, 2020 (not including GST/PST/payroll). No interest or penalties will accrue during this period.
5. GST deadlines and payments that were previously due March, April or May have been deferred until June 30, 2020.
6. Summer Students Program – The government will now be covering 100% of wages paid to students in the Summer Job Program for small businesses hiring students. The program will also be extended into the winter months.
Please feel free to share this with those it could help.
To read the full response plan, please see link for source:
CEWS 75% wage subsidy application
When? – Applications open April 27, 2020 but you can go ahead and calculate the benefit now to make the application quicker.
Where? – https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-wage-subsidy.html
How? – Please see below for more details. The process and calculation are a bit complex so you may want to engage your bookkeeper or accountant to apply for you as these are details on the process not instructions.
Step 1 – Make sure you have your direct deposit info on CRA to get your money quickly. Otherwise they will send a cheque which could take a significant amount of time.
Step 2 – Complete the CEWS spreadsheet
- Select claim period
- Select the worksheet that applies to how you pay your employees
b. Weekly (use if hours are variable or paid other than bi-weekly)
- Enter the amount of employees and remuneration in one of the following rows
a. If your employees earn more than $1,129.33/week use Row 3.
b. If your employees earn less than $1,129.33/week and have not had their pay reduced since March 15th use Row 4.
c. If the employee had their pay reduced since March 15th and earned less than $1,129.33 use Row 7 on.
i. Because these employees had reduced pay you now have to enter their average pay from Jan 1 – March 15, 2020.
ii. You need to also break out their earnings on a weekly basis and say if they were arms-length.
- Once completed you can go to the instructions and results tab and print off a record of how much your CEWS subsidy is for the period. If the total number of eligible employees looks incorrect it may not be your error. There seems to be an issue with this cell calculation.
Step 3 – Calculate your subsidy
Enter the following for each part:
- Claim period – March 15 – April 11
- Payroll numbers
i. Number of employees in the claim period
ii. Gross payroll – March 15 – April 11
iii. Basic CEWS (you will have calculated this on the spreadsheet)
- Premiums & contributions
i. This part is only if you continued to pay employees while they were not working. The CRA will pay the EI & CPP for these payroll expenses, But only if employees not working.
i. TWS – You have to reduce the subsidy claim by the TWS (10% subsidy) even if you have not claimed this amount. See below for discussion.
ii. EDSC work share – if you used the work sharing benefit you have to deduct it here.
i. The website will calculate your benefit and create a print-out to be used on your official application (opens April 27th)
There are 2 concerns with the calculation:
- Step 4 says to reduce the subsidy claim by the TWS (10% subsidy) even if you have not claimed this amount. This means that effectively the subsidy is only 65% of wages paid unless they change this by April 27th.
- As the program is written any non-arms length employees are limited to 75% of their average weekly earnings from January 1st to March 15th. However the spreadsheet does not factor this in even if you enter the average earnings from Jan – March. Therefore one could fill out the spreadsheet 100% correctly and calculate an incorrect amount.