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Government Incentives - CEWS, CERS, CEBA - - Better Business Bureau webinar

Improve Cash Flow & Access New COVID and BIPOC Funds
20 min Power Chat with BBB

 

  • Need Cash Flow Generation Ideas?
  • Are you a small business?
    Wondering what you can qualify for now under changes to CEWS, CERS & CEBA funding?
  • Wondering which funding options will benefit you the most?
  • Need a summary of New CERP changes?
  • Do you have unpaid receivables or idle inventory?
  • Are you a Black Entrepreneur?
  • Want to know about new funding options?

Here are the summarized highlights:

Download the slide deck

Canada Emergency Wage Subsidy (CEWS)

Announced Changes

  • The subsidy is extended to June 2021
  • The deadline to apply is January 31, 2021 or 180 days after the end of the claim period, whichever comes later
  • The subsidy per employee is based on Revenue Drop, no longer are businesses required to meet 30% minimum
  • Employment of 14 days within subsidy period is lifted
  • Period 8-13: Top-up rate based on 1-month, or 3-month
  • Base revenue drop comparison month for period 11, is the same as Period 10

Subsidy Rates

  • Safe Harbour of 75% subsidy through period 6
  • Commencing Period 5 (July 5-Aug 1), top-up rates were introduced to earn up to 85%, where revenue drop > 50%
  • For Periods 8-10, rate is capped at 65%
    • Revenue drop of 70% or more: 65%
    • Revenue drop of 50%-70%: 40%-65%
    • Revenue drop of 1%-50%: 0.8%-40%

Subsidy Rates

  • Safe Harbour of 75% subsidy through period 6
  • Commencing Period 5 (July 5-Aug 1), top-up rates were introduced to earn up to 85%, where revenue drop > 50%
  • For Periods 8-10, rate is capped at 65%
    • Revenue drop of 70% or more: 65%
    • Revenue drop of 50%-70%: 40%-65%
    • Revenue drop of 1%-50%: 0.8%-40%

How to Apply

  1. Ensure you have access to CRA My Business Account, or Represent a
    Client, or Web Forms Application
  2. Ensure Direct Deposit is set-up (CRA or Bank)
  3. Select period and correct CEWS Spreadsheet
  4.  Determine best base year comparison:
    • Same month from 2019, or Jan-Feb 2020 Avg
    • 3-month Top-up base, or 1-Month

Canada Emergency Rent Subsidy (CERS)

Where eligible entities have experienced a revenue drop due to COVID-19, a subsidy rate of up to 65% of commercial rent may be received.
With a top-up of 25% for entities forced to close due to lock-down. Subsidy to run through June 2021.

Who

Canadian businesses, non-profit organizations, or charities who had:

  • A CRA # on September 27 or
  • A Payroll Account on March 15
  • Experienced any drop in revenue
  • Have eligible expenses up to $75,000 per business location, per period ($300,000 for affiliated locations)
    • Rent to 3rd parties
    • For property owned: property tax, insurance & mortgage interest

When

A CERS application must be filed no later than 180 days after the end of a claim period.

  • Eligible expenses must be for the claim period
  • For expenses under a written agreement in place before October 9, 2020
  • Claim Periods:
    • September 27 –October 24
    • Current: Dec 20 – Jan 16

How

Apply through My Business Account or Represent a Client

 

  • Apply for CERS Number within your CRA online Account
  • Ensure Direct Deposit is setup
  • Ensure expenses are paid or will be paid within 60 days of receipt of subsidy
  • Application has questions for rent paid, as well as sections for property owned (not all sections will apply)

Watch out for Non-arm’s Length and Related Party Transactions.

Canada Emergency Business Account (CEBA)

CEBA provides interest-free, partially forgivable ($10,000 forgiven if remaining loan
repaid by Dec 31, 2022), loans of up to $40,000, to small businesses and not-for-profits,
that have experienced diminished revenues due to COVID-19 but face ongoing nondeferrable costs (agreements in place before March 1, 2020), such as rent, utilities,
insurance, taxes and wages.

  • CEBA expanded for an additional $20,000 interest–free loan, with 50% forgiven (up to
    $60,000 interest free and $20,000 forgiven)

Application Requirements

  • Applicants now have until March 31, 2021 to apply (apply online with Bank)
  • 2019 payroll between $20,000 and $1,500,000, or
  • Non-deferrable Expenses of $40,000 -$1,500,000
    • Rent, Property Tax, Utilities, Insurance (support to be provided with application)
    • Offset expense by other COVID-19 stimulus received. Is CEBA more beneficial?
    • Filed a 2019, or 2018 tax return
    • Forgiven portion should be included in 2020 tax return

Canada Recovery Benefit (CRB)

Support for Self-Employed Individuals:
The CRB gives support to employed and self-employed individuals who are directly affected by COVID-19
and are not entitled to Employment Insurance (EI) benefits. The CRB is administered by the CRA.
If you are eligible for the CRB, you can receive $1,000 ($900 after taxes withheld) for a 2-week period.

 

If your situation continues past 2 weeks, you will need to apply again. You may apply up to a total of 13 eligibility periods (26 weeks) between September 27, 2020 and September 25, 2021.

 

Eligibility:

 

  • During claim period you were not employed, or self-employed, or weekly income dropped 50% from
    the same period in 2019
  • You did not apply for, or receive, EI or other Canada Recovery benefits (Sickness, Cargiving)
  • You were not eligible for EI
  • You reside in Canada (Travelling internationally may make you ineligible for CRB)
  • You have a social insurance number, are at least 15 and earned at least $5000 in 2019 or 2020
  • You did not quit your job voluntarily on or after September 27, unless it was reasonable to do so
  • You are seeking working either as employee or self-employed and can earn up to $38,000 while on CRB

How to Apply:

 

  • Ensure you have access to My Account with the CRA and setup direct deposit
  • Apply on the first Monday after the 2-week period you are applying for has ended
  • Apply through My Account, or by calling 1-800-959-2019, or 1-800-959-2041
  • Period 5 is the earliest period open for application (November 22 to December 5)

Black Entrepreneurship Program (BEP)

National Ecosystem Fund: The Ecosystem Fund will award funding to regional and national not-for-profit
Black-led organizations across Canada.

 

  • It will allow not-for-profit Black-led organizations to develop new services or expand those they
    already offer such as mentorship, networking, financial planning, and business training for Black
    entrepreneurs.
  • Program is currently closed (Filing Deadline December 21, 2020)
  • New Application periods may open
  • http://www.ic.gc.ca/eic/site/150.nsf/eng/00003.html
 

BEP Loan Fund: Will provide for-profit owners and entrepreneurs with loans between $25,000 and $250,000

  • This program has not opened at this time, more details to come.

Tax Planning

Cash-Flow Generators

  • Cash-Flow Generators
  • Increase Tax Loss for carryback and refund of PY Tax
    • Allowance for specified uncollectible receivables
    • Inventory with declined value, write-down to FMV
  • Base 2021 Tax instalments on 2020 profitability
  • File tax return ASAP for refundable tax credits (SR&ED, Co-op students)
  • Consider stock-based compensation to attract talent without salary
    commitment

Employees Working From Home: $400 or T2200

  • For employees that had to work from home at least 50% of the time for 4
    consecutive weeks, they can claim a deduction on their tax return for $2
    for each day that hey worked from home during that period, and any other
    day they worked from home in 2020, up to $400 with no T2200
  • If home office expenses are greater than $400, a T2200 (new simplified
    form) will be required to be signed by employer
  • Form T777 needs to be completed in both situations

Loss Utilization (multiple entities)

  • Consider reasonable management fees
  • Opportunity to transfer assets and sell or lease back.
  • Is there an opportunity to amalgamate
  • Loss utilization plan: using a daylight bank loan to subscribe for preferred
    shares. Interest income to LossCo, corresponding dividend back to
    ProfitCo. Transfers loss to profitable entity.

Bonus:
CRA will allow employees working from home in 2020, due to Covid-19, to deduct up to $400 under a simplified home office expense deduction on their 2020 tax return. This replaces the regular T2200 process. More details to come.

Nicholas Coburn

Nicolas Coburn, CPA, CA, has 15+ years of experience spread across Government Audit, Industry Financial & Tax Reporting, and Big 4 Canadian Accounting Firms.

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