Over the past number of months, there have been a number of government subsidy programs announced, changed and extended. There is a lot of information to digest for small business owners. The rules are complex and it can be difficult to determine which programs your business qualifies for. We hope the following summary of the government subsidy programs announced by the Federal Government helps with determining what your business is eligible to claim.
CEWS – Canada Emergency Wage Subsidy
Changes to the CEWS program were passed into law on November 19, 2020. This legislation extends the CEWS program until June 2021. The changes include extending the maximum base subsidy rate of 40% with a maximum top-up subsidy rate of 25% until December 19, 2020. The base subsidy rates for claim periods eight to ten will not continue to decrease. Also, the method used to calculate the top-up subsidy is no longer based on the preceding three-month revenue-decline test. The top-up subsidy will now be determined by the change in an eligible employer’s monthly revenues, year-over-year, for either the current or previous month, similar to the base subsidy.
This provides an employer with a revenue loss of 70% or greater in a claim period to be eligible for a 65% wage subsidy.
Given the significance of these changes, the government has included a “safe harbour” rule applicable from September 27, 2020 to December 19, 2020. This provides an eligible employer with a top-up subsidy no less than it would have received under the previous three-month revenue decline test.
As of October 25, 2020, the subsidy per week in respect of eligible furloughed employees will be dependent on the employee’s weekly remuneration. If the weekly remuneration of the employee is less than $500 the subsidy will be equal to that amount. If the weekly remuneration is $500 or greater, the subsidy is calculated at the greater of $500 and 55% of pre-crisis remuneration for the employee, up to a maximum subsidy of $573.
The deadline to apply for CEWS for claim periods one to five is January 31, 2021. For all claim periods subsequent to period five, the due date for filing the claim is 180 days after the claim period ends.
CEBA – Canada Emergency Business Account
The government’s most recent announcement indicated that as of October 26, 2020, the CEBA program will be made available to businesses that have been operating out of a non-business banking account. To be eligible, businesses must have been operating as a business as of March 1, 2020, must successfully open a business account at a participating Canadian financial institution, and meet other existing criteria. The deadline to apply for CEBA has been extended to December 31, 2020.
The government also announced that they plan to expand the program from the previous $40,000 loan amount to a potential loan amount of $60,000. 25% of the original $40,000 loan will be forgivable if the loan is repaid by December 31, 2022. The additional $20,000 of loan amount will be forgivable at a rate of 50% if repaid by December 31, 2022. No additional details on the expansion of this program have been announced yet. Applications for the additional loan amount are not yet available.
CERS – Canada Emergency Rent Subsidy
The new Canada Emergency Rent Subsidy provides a subsidy on eligible expenses for qualifying businesses, non-profits and charities that have suffered a revenue drop. Eligible expenses will be subsidized on a sliding scale up to a maximum of 65% for qualifying organizations that have experienced a revenue decline of 70% or more.
Qualifying rent expense includes all commercial rent paid to the landlord including amounts under a net lease such as insurance, utilities, common area expenses, property taxes and management fees.
Although the name of the program does not suggest this, the CERS program is also available to qualifying property owners as long as the property is not primarily used to earn rental income from arms-length entities, either directly or indirectly.
Property taxes, property insurance and interest on commercial mortgages are qualifying expenses for the property owner that uses the property in commercial activities, either directly or indirectly. The qualifying expense must be reduced by any subleasing revenues received from arms-length parties.
Eligible expenses must be paid or payable under written agreements entered into prior to October 9, 2020 and related to real property located in Canada. If the eligible expenses are still payable at the time of filing the CERS application, they must be paid within 60 days after receiving the subsidy for that qualifying period.
Each qualifying period is subject to a maximum of $75,000 per location and an overall cap of $300,000 shared amongst affiliated entities.
Revenues will be calculated in the same manner as for the CEWS program. Once an entity has chosen to use a revenue method, that method must be used for the periods ranging from September 27, 2020 to December 19, 2020. The method selected will apply to both the base CEWS and the CERS. All applications must be made on or before 180 days after the end of the qualifying period.
Applications for the CERS program opened on November 23, 2020.
Not sure where to start or what is involved in applying for any of the above programs? Connect with Lott & Company. We have the knowledge and experience to work through the application process for you.