On October 21, 2021 the federal government announced changes to their COVID-19 support programs for businesses. It was announced that the Canada Emergency Wage Subsidy (CEWS) and Canada Emergency Rent Subsidy (CERS) programs will end with period 21 which ends on October 23, 2021—and that the Canada Recovery Hiring Program (CRHP) will be extended to May 7, 2022. The CEWS and CERS programs will be replaced by three new wage and rent programs which are more targeted and are intended to support those businesses that have been hardest hit by the pandemic.
Changes were also announced to individual support programs which includes plans for the Canada Recovery Benefit (CRB) to be discontinued. It will be replaced by the Canada Worker Lockdown Benefit which is targeted to support workers whose employment is interrupted by specific government imposed public health lockdowns. The government is also proposing to extend the Canada Recovery Caregiving Benefit and the Canada Recovery Sickness Benefit until May 7, 2022.
These new benefits will not be available until legislation is presented in Parliament and passed into law through the normal process. Parliament is not scheduled to sit until November 22 of this year and it will be a few weeks before any of these changes can be finalized to become available to taxpayers.
Discontinuance of CEWS and CERS
The government announced on July 30, 2021 that the CEWS and CERS programs would be available until October 23, 2021. Although the government could have extended the existing programs for another four weeks, the announcement of October 21, 2021 confirmed that the programs in their current form would both end on October 23, 2021 in favour of more targeted wage and rent support. Wage and rent support will be available under either the Tourism and Hospitality Recovery Program or the Hardest-Hit Business Recovery Program. Whereas the CEWS and the CERS had a minimum revenue decline of more than 10% to qualify for benefits under the programs, these new programs have a much higher threshold and must have a sustained revenue decline for the first year of the pandemic.
Entities that previously qualified for CEWS or CERS may also qualify, on a periodic basis, for the new special lockdown support program.
Applications under both CEWS and CERS programs have a deadline of 180 days after the last day in the qualifying period, which means that the last applications under the CEWS and CERS programs must be made April 21, 2022.
Extension of the CRHP
This program was announced in the 2021 Federal Budget as a way to continue to provide wage support to businesses that are increasing their staffing levels as they recover from the pandemic. Please see our Tax Alert How the Canada Recovery Hiring Program supports jobs and growth for more details of this program. Without new legislation to extend it, this program will expire on November 20, 2021. The government has announced it will increase the subsidy rate in the period from October 24 to November 20, 2021 from the planned rate of 20% to a new rate of 50%. The government also plans to extend the program at this new rate of 50% until at least May 7, 2022 with provision for a further extension of this program to July 2022 if necessary.
Under the proposed extension, the existing baseline period of March 14 to April 10, 2021, will continue to be used to calculate incremental remuneration. The existing eligibility rules will also continue to apply—including the required revenue decline of more than 10%—and that if the entity applying is a for-profit corporation, it must be a Canadian controlled private corporation.
Tourism and Hospitality Recovery Program (THRP)
This new program is based on the CEWS and CERS programs, and targets organizations in the tourism and hospitality industry that have been severely impacted by the pandemic and continue to struggle. Examples of eligible organizations include hotels, restaurants, bars, festivals, travel agencies, tour operators, convention centres, convention and trade show organizers, and others that will be outlined in upcoming legislation.
Eligible organizations will be required to meet two conditions to qualify:
- They have an average monthly revenue reduction of at least 40% over the first 13 qualifying periods for the CEWS (12-month revenue decline)
- They have a current-month revenue loss of at least 40%
The program will run from October 24, 2021 to May 7, 2022 with seven periods (periods 22 to 28). The subsidy rate will be a maximum of 75% from October 24, 2021 to March 12, 2022 (claim periods 22 to 26). The subsidy rates would start at 40% for eligible organizations with a 40% current-month revenue decline, and will increase in proportion to current-month revenue loss up to the maximum rate of 75% for those organizations with a current-month revenue decline of 75% or higher. The subsidy rates would be reduced by half from March 13, 2022 to May 7, 2022 (periods 27 and 28).
The subsidy is then determined based on eligible wage and rent expense as calculated under the CEWS and CERS programs.
If the entity claiming the THRP has a location that is operating at reduced capacity due to a public health restriction, then lockdown support would be available at a fixed rate of 25% and pro-rated based on the number of days a particular location was affected by a lockdown. This support is in addition to the regular support shown in the table below.
| October 24, 2021, to May 7, 2022 (Periods 22 – 28) | ||
|---|---|---|
| Periods 22 – 26 October 24, 2021 – March 12, 2022 | Periods 27 – 28 March 13, 2022 – May 7, 2022 | |
| Current-month revenue decline | ||
| 75% and over | 75% | 37.5% |
| 40–74% | revenue decline e.g., 60% revenue decline = 60% subsidy rate | revenue decline ÷ 2 e.g., 60% revenue decline ÷ 2 = 30% subsidy rate |
| 0–39% | 0% | 0% |
Table courtesy of the Department of Finance
Hardest-Hit Business Recovery Program (HHBRP)
This new program is also based on the existing CEWS and CERS programs, and the HHBRP is targeted at eligible organizations in any sector that do not qualify for the THRP. Examples of eligible organizations under this program could include gyms or beauty salons.
Eligible organizations will be required to meet two conditions to qualify:
- They have an average monthly revenue reduction of at least 50% over the first 13 qualifying periods for the CEWS (12-month revenue decline)
- They have a current-month revenue loss of at least 50%
The HHBRP will run for the same periods as the THRP. The subsidy rates would start at 10% for eligible organizations with a current-month revenue loss of 50% and up to the maximum rate of 50% for those organizations with a current-month revenue decline of 75% of higher. As with the THRP, subsidy rates will be reduced by half from March 13, 2022 to May 7, 2022 (periods 27 and 28). The subsidy is determined based on eligible wage and rent expenses as calculated under the CEWS and CERS programs.
Lockdown support would be available at a fixed rate of 25% and pro-rated based on the number of days a particular location was affected by a lockdown if the entity claiming the HHBRP has a location that is operating at reduced capacity due to a public health restriction. This support is in addition to the regular support shown in the table below.
| October 24, 2021, to May 7, 2022 (Periods 22 – 28) | ||
|---|---|---|
| Periods 22 – 26 October 24, 2021 – March 12, 2022 | Periods 27 – 28 March 13, 2022 – May 7, 2022 | |
| Current-month revenue decline | ||
| 75% and over | 75% | 37.5% |
| 40–74% | revenue decline e.g., 60% revenue decline = 60% subsidy rate | revenue decline ÷ 2 e.g., 60% revenue decline ÷ 2 = 30% subsidy rate |
| 0–39% | 0% | 0% |
Table courtesy of the Department of Finance
Special Lockdown Support for All Entities
The government also announced that organizations in any sector will be eligible for lockdown support at subsidy rates provided under the THRP. The only difference is that there is no need to show a 40% revenue decline over the first 12 months of the pandemic. Qualification for the special lockdown support requires organizations to:
- Have one or more locations subject to a public health restriction that lasts for at least seven days in the current claim period
- Cease activities that accounted for approximately 25% of total revenues of the entity during the prior reference period. The revenue decline would need to be at least 40% in the current reference period as compared to the prior reference period.
The lockdown support rate is calculated at the same rate as under the TRHP program (see table 1 above). Note that this lockdown support would not be applicable to entities claiming either the THRP or the HHBRP as there is a separate provision for lockdown support within those programs.
Individual Support Programs
The government is ending the Canada Recovery Benefit as of October 23, 2021 and it is being replaced with a new benefit, the Canada Worker Lockdown Benefit, which is more targeted support to individuals. This benefit would provide $300 a week in income support to eligible workers if they are unable to work due to a local lockdown anytime between October 24, 2021 and May 7, 2022. Details on the new benefit include:
- Eligible workers will receive $300 a week
- It is only available to workers whose work interruption is a direct result of a government-imposed public health lockdown
- It is available until May 7, 2022 with retroactive application to October 24, 2021 if warranted
- It is available for the entire duration of the lockdown (up until May 7, 2022)
- It is available to workers who are ineligible for Employment Insurance (EI) benefits and those who are eligible for EI, as long as the eligible employees are not paid EI benefits for the same period
- The benefit is not available to individuals whose loss of income or employment is due to their refusal to adhere to a vaccine mandate
The government also announced that it will extend the Canada Recovery Caregiving Benefit and the Canada Recovery Sickness Benefit until May 7, 2022 to continue to support individuals who currently qualify for these benefits. The maximum duration of these benefits will be increased by two weeks, extending the caregiving benefit from 42 to 44 weeks and the sickness benefit from four to six weeks.
How BDO can help
Our BDO tax professionals understand the uncertainty and challenges your business is facing during the COVID-19 crisis and this recovery period. We can help you assess how these new government relief programs will affect your organization and provide guidance in determining the next steps.
The information in this publication is current as of November 11 2021.
This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.