COVID-19 – Canadian Small Business Guide

This article has been drafted to address concerns from business owners and organization leaders. This article does not address the special programs and benefits available to individuals and workers directly impacted by COVID-19. The article focuses on actionable decisions that business owners need to make.

We will attempt to update this article as information is announced by governments. Last updated: May 19, 2020 @ 4:00PM

Here is some clear guidance for Canadian small businesses who need to better understand what they should do, given the COVID-19 pandemic. This guide helps business owners understand the impact of various programs and next steps that should be taken. 

Government information found here

Actionable Items

Do you need cash?
If you were going to borrow money in the near future or if your business would benefit from funding (that will be paid back), there are some good programs being announced:

    • Canada Emergency Business Account (CEBA) – You will be able to apply for a government backed loan (up to $40K) (25% of loan, up to $10K may be forgiven). Interest free until Dec 31, 2022.
      • Details from government
      • To qualify the organization will need to demonstrate they paid between $20K-$1.5M in payroll in 2019(Previously announced as $50K-$1M). Loans will need to be repaid before December 31, 2022.
      • You will apply with your bank directly(Program is NOW available directly with your bank.)
      • You need to have a business bank account.
      • On May 19, 2020 Prime Minster Trudeau announced that sole proprietors with no payroll account could also qualify for CEBA and would need:
        • To have had less than $20K payroll in 2019 
        • A business operating account at a participating financial institution
        • A Canada Revenue Agency business number, and to have filed a 2018 or 2019 tax return.
        • Eligible non-deferrable expenses between $40,000 and $1.5 million. Eligible non-deferrable expenses could include costs such as rent, property taxes, utilities, and insurance.
    • SME Loan and Guarantee program – Your existing bank is getting some flexibility in lending from the government and will be incentivized to lend more money than before. There are two main programs being offered right now through your primary bank
      • BDC Co-lending (Up to $6.25M @ Commercial rates over 10 years)
      • EDC BCAP Guarantee (Up to $6.25M)

Flexibility on expenses:

    • Emergency Commercial Rent – Government announced a program that will help businesses with their commercial rent for April, May and June. (Details to come) 
    • Approach your bank and ask for deferral of principal. Many banks have programs in place right now for COVID-19 to defer principal payments on loans
    • Approach your landlord and ask for flexibility on rent. Many landlord have provided flexibility awarded to them on their mortgages
    • Talk to your vendors and ask to defer payments
    • Government has announced on April 15 that there will be some flexibility provided to business owners on their commercial rents(details to be announced)

Open a CRA My Account now!

My business is stopped or slowed down. Should I lay off my staff?

    • The government has suggested that you should hire back your employees that you may have already let go. You can hire them back and pay the 75% of their normal salary(which will get reimbursed by the CEWS program(detailed below)(If you qualify). The government prefers you hire back your employees so that the businesses are ready for when the economy starts back up! If you CAN pay the 25% top-up the government encourages you to do so(But it’s not required).
    • Try and keep paying your employees if your business can still generate revenue/income.
    • If the business just won’t be able to pay everyone, you can do temporary lay offs
      • The staff will be eligible for EI or the CERB (mentioned below)
      • If filing ROEs for your staff:
        • Use Code A — Shortage of Work / End of Contract or Season if:
          • You’ve closed your business or adjusted your workforce as a precaution.
        • Use Code D — Illness/Injury for:
          • Actual illness or an employee who has tested positive.
          • An employee who has traveled and is now self-isolating.
        • Use Code N — Leave of Absence if:
          • The employee is showing no symptoms but is making a personal choice to distance themselves just to be safe.
        • BOX 18 — Do not put a note in this field. This “flags” the ROE in the system and may slow processing.
      • People who appied to EI because of COVID-19 have been automatically switched over to the CERB. They don’t need to re-apply.

Canada Emergency Wage Subsidy (CEWS)

  • Government information here
  • CEWS will cover 75% of the first $58,700 earned by employees between March 15, 2020 and June 6, 2020.
  • The employee does NOT need to actually be working, this is meant to be a alternative to the CERB or EI for employees.
  • The CRA will administer this program(not through your payroll software). Applications will be made on the CRA website directly and payment will be received after about 6 weeks.
  • The initial criteria for eligible indicates that business owners need to prove a 15% decrease in revenue for March. April and/or May (compared to either the same month in the prior year, or January 2020, or February 2020). A new application would need to be made for every month.
  • Important: If you qualify for one period, you will automatically qualify for the next subsequent period! It does not mean you qualify for all extra periods, but only the next single period.
  • You will need to show a 15% decrease for March. you will need to show a 30% decrease for April and/or May.
  • New businesses incorporated after February 2019 would compare their previous months’ revenue for eligibility.
  • If you don’t qualify for the 75%, you can still apply for the 10% wage subsidy by reducing your payroll remittances by 10% of remuneration of  your employees. Your 75% subsidy will be reduced by any 10% subsidy claimed.
  • We can hire back your employees and apply for the subsidy to pay for their payroll costs, up to 75% of their pre-crisis salary. (It may be more advantageous for the employees to claim the $2,000 from CERB however).
  • You do NOT NEED to top up the 25%! The government urges business owners to pay the 25% if they can. Zenbooks has taken the interpretation that if the employee is actually working, the employer should top up the 25%, otherwise you can pay them the 75% and get reimbursed the 75%.
  • You can hire NEW employees and claim 75% of their salaries as well.
  • If the employee’s salary is more than $35K, it’s expected that the Wage Subsidy will be more advantageous than the CERB. Employee DON’T claim with CERB and the 75% wage subsidy(it’s one or the other).
  • As of May 15, 2020 the government has extended the program an additional 12 weeks to August 29, 2020. 
  • This subsidy application is complex, because of the integration with the 10% wage subsidy. We recommend that your accountant file the subsidy.

I’m a business owner and I’m not sure what program I should apply for:

Canada Emergency Response Benefit (CERB)

  • Government announced that if you’re earning $1,000 or less, you could now receive the CERB if you stopped working because of COVID-19, and:
  • Who’s eligible? (Basically everyone who doesn’t get EI)
    • You must reside in Canada
    • You are 15 years of age or older at the time of application
    • You have stopped or will stop working for reasons related to covid-19, or because you are unable to work due to illness, or because you lost your employment for other reasons beyond your control; and
      • If you are submitting for your first benefit period, that you have stopped or will stop working for at least 14 consecutive days within the 4 week benefit period; or
      • If you are filing for a subsequent benefit period, you did not receive any employment or self employment income for the period for which you previously claimed the benefit and do not expect to receive any employment or self employment income in the 4 week benefit period
    • You have not quit your job voluntarily
    • You are not receiving nor have you applied for the CERB from the Canada Revenue Agency nor are you receiving Employment Insurance benefits for the same benefit period
    • You have earned a minimum of $5,000 in income within the last 12 months or in the 2019 calendar year from one or more of the following sources:
      • Employment income
      • Self-employment income
      • Non-eligible dividends
    • Zenbooks’ notes:The reality is that many of you still earn SOME self employment income. If you are self-employed business owner and are still receiving more than $1,000, you CANNOT apply for CERB.  
  • Emergency Care Benefit ($900 bi-weekly)
    • This program is being replaced by the above mentioned Canada Emergency Response Benefit (CERB)

Programs offering flexibility by federal government:

Small Businesses, NPO and Charities

  • A Temporary Wage Subsidy program for eligible employers (small CCPCs, NPOs, registered charities) that permits eligible employers to reduce income tax remittances by 10% of remuneration paid to employees between March 18 and June 20, 2020. (employers cannot reduce its required CPP or EI premiums).
    • You are an eligible if you are: 1) are a non-profit organization, registered charity, or a Canadian controlled private corporation (CCPC); 2) have an existing business number and payroll program account with the CRA on March 18, 2020; and 3) pay salary, wages, bonuses, or other remuneration to an employee.
  • The deadline for businesses to pay any income tax amounts that become owing or due after March 18, 2020 and before September 1, 2020 has been extended to September 1, 2020 (i.e. a corporation will not be assessed any penalties or interest if a balance due is paid by September 1, 2020). This does not apply to GST/HST remittances due. The corporate tax return filing deadline has not been extended;
  • GST and HST Payments can now be postponed until June 2020 (more details to come)
  • Full details of deferral of filings can be found here.

Administrative matters

  • As a temporary administrative measure, the CRA will recognize electronic signatures as having met the signature requirements in respect of Forms T183 and T183CORP;
  • The taxpayer Relief program is always available for circumstances that are beyond your control that caused you to incur penalties and interest. Don’t rely on this program, but in a worst-case scenario, we can apply to try and recover some of those penalties/interest

Audits/Collections

  • Starting March 18, the CRA will not bother any small or medium businesses to initiate any GST/HST or Income Tax audits for the next 4 weeks.
  • The CRA has suspended collection activities on new tax debts until further notice;
  • The CRA is currently holding most notice of objections in abeyance, other than those related to benefit and credit entitlements;
  • The Tax Court of Canada has suspended all hearings and conference calls until May 1. During this period, all timeline requirements provided for under the Tax Court of Canada Rules and Tax Court of Canada Act stop running (this freeze does not apply to deadlines under the ITA);

Trusts

  • For trusts with a taxation year end of December 31, 2019, the filing due date of March 31, 2020 is deferred to May 1, 2020. Furthermore, all trusts that have an upcoming income tax balance due date or an income tax installment payment due date before September 1, 2020 have their payment due date extended to September 1, 2020. Penalty and interest implications for upcoming trust tax obligations not covered by the latter relief described will be considered by the CRA on a case-by-case basis;

Charities

  • Where Form T3010: Registered Charity Information Return, is due between March 18 and December 31, 2020, it may be filed by December 31, 2020. Also, the Charities Directorate has suspended all operations, including registration and audit activities, until further notice.
 

stay in the loop

 

Want to stay up to date with how COVID-19 might impact your business? We will continue to monitor the situation and keep this page updated for new announcements from the government.

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Eric Saumure, CPA, CA, Principal

Eric Saumure, CPA, CA, Principal

Eric is a recognized Chartered Accountant (CA) and Chartered Professional Accountant (CPA) in the province of Ontario.
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