Where to Go for Small Business Help – What You Can Access

*UPDATED*

“I have a small business, now what?” 

Over the last few weeks, our Federal and Provincial governments have introduced various measures to help support Canadians and businesses in the uncertain times the COVID-19 pandemic has created. These updates, announced daily, leave a lot of questions as to what small business help is available, and how exactly the aid is accessed.

Here, our Manning Elliott team has broken down some of these new measures and initiatives available for small businesses, along with answers to questions you might have – all in one place. 

Financial Measures

75% Wage Subsidy 

Do you have employees?

The Federal government has announced a 75% wage subsidy on remuneration which is retroactive to March 15, 2020, and will be in place for 12 weeks until June 6, 2020

This new subsidy covers individuals, taxable corporation, partnerships, not-for-profit organizations and registered charities that has had at least a 30% decrease in gross revenue as a result of COVID-19 (15% for the month of March).  The wage subsidy will cover 75% of employee salary of up to $58,750 which equals a wage subsidy up to $847 per week.

Do I qualify and how do I get these benefits?

• For established employers, the decrease in revenue will be measured using the chart below

* The COVID-19 Emergency Response Act stipulates that an election must be filed to use the average of January & February 2020 revenue as the reference period for eligibility. This election will require the average of January and February 2020 to be the reference period for all three claiming periods.

If the eligible entity was not carrying on a business or its ordinary business activities as of March 1, 2019, it must select January and February 2020 as the reference period for purposes of CEWS.

• The Ministry of Finance will set up an online portal for the subsidy applications which will be accessed through My Business Account with CRA starting on April 27, 2020.  Manning Elliott is able to assist our clients with this application.  Please contact us for further details; and

• The first payments are expected to begin May 7, 2020.

It is recommended that employers set up direct deposit with the CRA to expedite receipt of the 75% Wage Subsidy. For a more detailed analysis of the requirements of the 75% wage subsidy and its interaction with other COVID19 relief measures, please refer the information here. 

10% Wage Subsidy

In addition to the 75% remuneration subsidy noted above, there is also a 10% subsidy of the remuneration you pay up to $1,375 per employee and to a maximum of $25,000 total per employer (between March 18, 2020, and June 20, 2020). This subsidy is a reduction of income tax withholdings remitted to the CRA on payroll withholdings. CPP and EI amounts do not qualify for this subsidy, only taxes withheld. Most payroll providers have already implemented this into payroll software packages.

This program runs for 12 weeks until June 6, 2020, and any benefits received under the 10% Wage Subsidy will reduce the employer’s entitlement to the 75% Wage Subsidy. Eligible employers who do not qualify for the 75% wage subsidy may be able to claim the 10% wage subsidy.

The 10% wage subsidy is limited to Canadian-controlled private corporations that claimed a small business deduction in preceding years. It is also available to individuals (other than a trust), non-profit organizations, registered charities, and partnerships where the members of the partnerships meet the aforementioned criteria.

Additional details on the 10% Wage Subsidy can be found on our temporary wage subsidy blog.

What happens if I make an error?

The CRA has indicated that it will be using a combination of automated questionnaires, follow up phone calls and comprehensive reviews or audits to verify the eligibility of claims. Employers must ensure that records are kept demonstrating the eligibility for the claim including the calculation of the reduction in revenue and the eligible remuneration amounts. Where the employer has been found to have claimed an ineligible wage subsidy, the ineligible portion of the subsidy must be repaid with interest. In addition, the new legislation specifically provides for a penalty of 25%  for employers engaging in artificial transactions to reduce revenue in order to qualify for the subsidy. Existing legislative provisions would allow for additional penalties of 50% of any ineligible subsidies claimed where an employer knowingly, or under circumstances amounting to gross negligence, makes a false statement of omission on the application. It should be noted that in the Federal government’s announcement of the program they mentioned that the penalties could be as high 225% of any ineligible wage subsidy  claimed which would reference the inclusion of criminal penalties.

What if I need employees to run my business, but our staffing requirements have decreased?

The Work Sharing Program also offers small business help, allowing businesses to continue to employ their employees for the hours required during a temporary decrease in business beyond the control of the employer. This program provides Employment Insurance benefits to your employees who agree to reduce their regular working hours and share the work amongst the remaining employees.

Do I qualify, and how do I apply?

To be eligible for the Work Sharing Program your business must be a year-round business in Canada, have been in existence for at least one year and have at least 2 employees for the Work Sharing Program. All parties to the Working Sharing agreement must agree to reduce their hours by the same percentage, share the available work, and apply together.

You can find more information about this measure here, on the Government Canada’s site. The Federal government has extended the maximum duration of this program from 38 weeks to 76 weeks for employers affected by COVID-19.

Need Business Financing?

There are many new loan opportunities providing small business help, and access to these types of financing agreements will be easier as the federal government backs them:

1. Canada Emergency Business Account – If your payroll for 2019 was between $20,000 and $1.5M you’re eligible to receive a loan through an eligible financial institution. The Canada Emergency Business Account will be an interest-free loan up to $40,000!  Additionally, up to $10,000 of this amount (e.g. 25% of the loan amount) will be eligible for forgiveness if the remaining portion of the loan is repaid before December 31, 2022. This can be now accessed through your financial institution.

2. Export Development Canada “EDC” Backed Loan – EDC will guarantee new operating term loans that banks extended to small and medium-sized enterprises up to $6.25 million through co-lending arrangements between the banks and EDC.

3. Co-Lending Program for Small and Medium-Sized Enterprises “SME” – The Business Development Bank of Canada is working with Canadian financial institutions to co-lend term loans to SMEs for operational cash flow requirements. Eligible businesses may obtain incremental credit amounts up to $6.25 million through this program.

To find out if you qualify for small business help through these loan items above,
please contact your bank for further details.

Are you currently paying rent for your business?

The Federal government with partnerships with Provincial governments announced a 75 percent rent reduction for businesses through the Canada Emergency Commercial Rent Assistance Program. Rent will be reduced by 75 percent for small businesses for the months of April, May and June.

How does this work?

The government will cover 50 percent of this reduction, the tenant will be responsible for 25% of the remaining rent and the property owners will cover the last 25%. These benefits will be offered through a forgivable loan to qualifying commercial property owners to cover 50% of the three monthly rent payments that are payable by eligible small business tenements who are experience financial hardship during April to June 2020.

Do I qualify and how do I apply?

Businesses, including non-profits and charities who have had to temporarily ceased operations or experienced at least 70% drop in pre-COVID-19 revenues, with monthly rent costs of less than $50,000 are eligible for the new benefit.  The property owner and the small business must also enter into a rent forgiveness, or similar agreement.  It is expected that the program will be operational by mid-May. These benefits are retroactive to April.

Have financing but struggling to make payments?

Reach out to your bank and request to defer loan payments for some time. From what we have seen, banks are working with their clients to help navigate this uncertain time. You must reach out to your bank ahead of time before missing payments, which will damage your credit score and the ability to obtain some of the new loan programs mentioned above.

Can I stop all forms of tax remittances?

The Canada Revenue Agency has provided administrative relief for any corporate Part 1 tax balances owing between March 18, 2020, and September 1, 2020. If you operate your business as a sole proprietorship or hold a partnership interest as an individual, the payment date for the 2019 tax year has also been extended to September 1, 2020. No interest or penalties should accumulate on these amounts owing during this period.

Do I qualify, and how do I get these benefits?

Nothing is required to benefit from this small business help, just cease making payments!

1. Goods and Services Tax/Harmonized Sales Tax – Businesses can defer GST/HST remittances that became owing on or after March 27, 2020, until June 30, 2020. This applies for monthly filers on remittances collected for the February 2020 to April 2020 reporting periods; for quarterly filers on remittances collected for January 1, 2020, to March 31, 2020 reporting period; and for annual filers whose GST/HST returns or instalments are due March, April, or May 2020. Any GST/HST instalments due on or after March 27, 2020, can be deferred until June 30, 2020. 

2. Provincial Taxes – Effective as of the March 23, 2020 announcement date, businesses can defer filing and making BC provincial tax payments for PST, tobacco tax, motor fuel tax, carbon tax, and Employer Health Tax until September 30, 2020.

3. Custom Duties – Are now deferred until June 30, 2020.

Times of uncertainly like this can be very stressful for many; accessing qualified small business help shouldn’t be. At Manning Elliott, we’ve paid close attention to these new measures and initiatives available for small businesses, as noted by both our Provincial and Federal Governments.

We can weather trying times like these by continuing to work closely together (naturally, in a socially distant way for the time being). If you still have questions about available small business help as outlined above, let’s talk – we are here to help you. 

We have no doubt that together, we will get through this. On behalf of all of us here at Manning Elliott, we wish you, your staff, and your families good health. 

This content is believed to be accurate as of the date of posting. Canadian Tax laws are complex and are subject to frequent change. Professional advice should be sought before implementing any tax planning. Manning Elliott LLP cannot accept any liability for the tax consequences that may result from acting based on the information contained therein.