The Road to Recovery

Since an employer is permitted to claim either the CRHP and the CEWS, but not both, an analysis should be done for each claim period to determine which assistance is more beneficial to your business.

The CRHP application portal will open following Royal Assent of Bill C-30.

To learn more about the Canada Recovery Hiring Program, visit our COVID-19 Hub.

The most popular COVID-19 government support program, the Canada Emergency Wage Subsidy (CEWS), was set to expire in June, but has been proposed to be extended until September 25, 2021. The maximum combined base subsidy and top-up wage subsidy rate for active employees of 75 per cent ends with the qualifying period beginning on June 6, 2021 (period 17).

Beginning July 4, 2021 (period 18), the CEWS maximum wage subsidy rates would be gradually phased out, starting with a rate of 60% for the period beginning July 4, 2021, to 40% for the period beginning August 1, and finally to 20% for the period beginning August 29, 2021. As well, beginning July 4, 2021, employers would need to have a decline in revenues of more than 10 per cent to be eligible for the CEWS.

The CEWS for furloughed employees is proposed to be extended until August 28, 2021. The wage subsidy for furloughed employees would continue to be available to eligible employers that qualify for the CEWS for active employees for the relevant period until August 28, 2021. Employers will also continue to be entitled to claim, under the CEWS, their portion of contributions in respect of the Canada Pension Plan, EI, the Quebec Pension Plan and the Quebec Parental Insurance Plan for furloughed employees.

Note: The next CEWS application deadline is June 17, 2021, for claim period 10 (November 22 to December 19, 2020).

To learn more about the Canada Emergency Wage Subsidy, visit our COVID-19 Hub.

CEWS’ sister program, the Canada Emergency Rent Subsidy (CERS) and Lockdown Support was also set to expire in June, but has been proposed to be extended until September 25, 2021.

The CERS base subsidy rate of 65 per cent ends with the qualifying period beginning on June 6, 2021 (period 17).

Beginning July 4, 2021 (period 18), the CERS base subsidy rates would be gradually phased out, starting with a rate of 60% for the period beginning July 4, 2021, to 40% for the period beginning August 1, and finally to 20% for the period beginning August 29, 2021. Beginning July 4, 2021, employers would need to have a decline in revenues of more than 10 per cent to be eligible for the Rent Subsidy and Lockdown Support.

The current subsidy rate of 25 per cent for the Lockdown Support would remain available until September 25, 2021.

Note: The next CERS / Lockdown Support application deadline is June 17, 2021, for period 3 (November 22 to December 19, 2020).

To learn more about the Canada Emergency Rent Subsidy and Lockdown Support, visit our COVID-19 Hub.

Access to the Canada Emergency Business Account (CEBA) program closes this month. Applicants have until June 30, 2021 to apply for a $60,000 CEBA loan or the $20,000 expansion at their financial institution.

The CEBA program provides interest-free loans of up to $60,000 to small businesses and not-for-profits. Repaying the balance of the loan on or before December 31, 2022 will result in loan forgiveness of 33 percent (up to $20,000).

Eligibility for CEBA expanded by removing the previous March 1, 2020 condition for having an active business chequing/operating account. With this removal, eligible businesses can apply after opening a business chequing/operating account with their primary financial institution. Approved CEBA applicants can receive a $60,000 loan or a $20,000 CEBA loan expansion (for those who already received the original $40,000 CEBA loan).
Some financial institutions provide CEBA funds via a deposit directly into an operating bank account, while others provide CEBA funds through access to a revolving credit facility (eg. a revolving line of credit). If you received access to CEBA funds through a revolving credit facility, ensure you take note of the deadline date by which you must withdraw or transfer funds from your credit facility in order to avoid losing access to the approved CEBA funds.

If you are eligible and are considering applying for the $20,000 expansion or the $60,000 loan, this month offers you the final window of opportunity to do so.

To learn more about the Canada Emergency Business Account, visit our COVID-19 Hub.

Immediate Expensing Deduction

A proposed new rule which could yield significant tax savings for Canadian businesses is the immediate expensing deduction, introduced in the 2021 Federal Budget. This rule would provide temporary immediate expensing in respect of certain property acquired by a Canadian-Controlled Private Corporation (CCPC). This immediate expensing would be available for “eligible property” acquired by a CCPC on or after after April 19, 2021 and that becomes available for use before January 1, 2024, up to a maximum amount of $1.5 million per taxation year. The immediate expensing would only be available for the year in which the property becomes available for use. The $1.5 million limit would be shared among associated members of a group of CCPCs. The limit would be prorated for taxation years that are shorter than 365 days. The half-year rule would be suspended for property for which this measure is used. For those CCPCs with less than $1.5 million of eligible capital costs, no carry-forward of excess capacity would be allowed.

Eligible property under this new measure would be capital property that is subject to the capital cost allowance (CCA) rules, other than property included in CCA classes 1 to 6, 14.1, 17, 47, 49 and 51, which are generally long lived assets.

CCPCs with capital costs of eligible property in a taxation year that exceed $1.5 million would be allowed to decide to which CCA class the immediate expensing would be attributed and any excess capital cost would be subject to the normal CCA rules. The availability of other enhanced deductions under existing rules – such as the full expensing for manufacturing and processing machinery and equipment and for clean energy equipment, introduced in the 2018 Fall Economic Statement – would not reduce the maximum amount available under this new measure. In other words, a CCPC may expense up to $1.5 million in addition to all other CCA claims under existing provisions of the Income Tax Act, provided the total CCA deduction does not exceed the capital cost of the property.

Immediate expensing under this new rule would not change the total amount that can be deducted over the life of a property – the larger deduction taken in the first year in respect of a property would eventually be offset by a smaller deduction, if any, in respect of the property in future years.

Business owners considering capital investments to help hasten recovery and growth should factor these tax savings into their projections and plans.