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: March 27, 2020 @ 12:00PM

 

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. 

 

Announced March 27, 2020

The federal government has announced major economic changes to businesses on March 27th(More information to come by March 30th)!

  • Increase of payroll subsidy from 10% to 75% (retro active to March 15th, 2020)
  • “Storefront” businesses will be able to apply for $40K government back loans
    • $10K forgiven on loan
  • GST/HST Payments are now being postponed to June

Information will be available over the weekend!

 

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:

    • Government backed loan – You will be able to apply for a government backed loan (up to $40K) ($10K of which may be forgiven)
    • Business Development bank of Canada(BDC) – BDC is usually a great lender. But right now, there are incredibly generous lending terms you should take advantage of that are subsidized by the government. Apply here
    • Private Banks – Your existing bank is getting some flexibility in lending from the government and will be incentivized to lend more money than before. Approach your bank to see what they can offer you now as this is a good time to approach them.

Flexibility on expenses:

    • 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

Open a CRA My Account now!

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

    • 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 filings 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 travelled 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 themself 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 apply to EI will be automatically switched over to the CERB once it is in place.

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

  • Canada Emergency Response Benefit (CERB) (available in early April)
  • Who’s eligible? (Basically everyone who doesn’t get EI)
    • Canadians who have lost their job, 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 who are sick or at home because of school and daycare closures.
    • wage earners, as well as contract workers and self-employed individuals who would not otherwise be eligible for Employment Insurance (EI).
    • workers who are still employed, but are not receiving income because of disruptions to their work situation due to COVID-19, would also qualify for the 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 75% (Previously announced as 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)

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.

We will continue to monitor the situation and keep this page updated for new announcements from the government that will impact your business.

Stay safe!

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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