Federal COVID-19 support programs for businesses—a year-end summary

December 07, 2021

Many businesses will soon be closing their books on another year and looking ahead to the challenges and opportunities of 2022. Now is a good time to reflect on the COVID-19 support programs the federal government has created for businesses, not-for-profits, and charitable organizations to ensure you don't miss out on subsidies and funding for which you qualify.

Canada Emergency Wage Subsidy (CEWS)

Based on figures given in the 2021 Federal Budget, the CEWS program was by far the largest of the business support programs offered in 2020 and 2021. This program supports eligible entities which saw their revenue decline from pre-pandemic levels.

On Oct. 21, the federal government announced the CEWS program would end on Oct. 23, 2021.

Submitting a claim as soon as businesses have the required information for the claim period will result in the quickest refund. However, eligible entities have 180 days after the end of each four-week qualifying period to make their CEWS claim for that period. After this deadline, applications for subsidies cannot be made and any claims filed can only be adjusted in very limited circumstances, such as for downward adjustments.

As of mid-December, the following claim periods are still open:

Chart 1
CEWS Claim Period Due Date
Period 17 – June 6 to July 3, 2021 Thursday, December 30, 2021
Period 18 – July 4 to July 31, 2021 Thursday, January 27, 2022
Period 19 – August 1 to August 28, 2021 Thursday, February 24, 2022
Period 20 – August 29 to September 25, 2021 Thursday, March 24, 2022
Period 21 – September 26 to October 23, 2021 Thursday, April 21, 2022

Another reason to make a timely application for a CEWS claim—especially for periods that close around your fiscal year-end—has to do with the payment of taxes. CEWS claims are considered revenue and are taxable on the last day of the qualifying period to which they relate.

For example, a claim made for Period 21, which ended on Oct. 23, 2021, will be taxable for a company with an Oct. 31, 2021 year-end, even if the application for the claim is not made until 2022. This rule may cause cash flow issues if tax becomes payable on the benefit before it is received.

Action item: Review your claims

If you have been making CEWS claims, review the status of open claim periods to ensure you apply for any that you qualify for before the deadline. Note that for all open claim periods except for period 17, entities must have more than a 10% revenue decline to be eligible for CEWS.

Action item: Is CEWS repayment required?

If you are a public company or an eligible entity controlled by a public company, you may need to repay CEWS if you received the subsidy for any of the five claim periods that started after June 5, 2021.

A new restriction applies where named executives (as found in the Statement of Executive Compensation for Named Executive Officers pursuant to National Instrument 51-102 Continuous Disclosure Obligations) received higher aggregate compensation in 2021 than in 2019. This increase, if any, must be compared to the aggregate of CEWS claims made in the qualifying periods between June 6, 2021, and Oct. 23, 2021, and repayment commensurate with the increase in executive compensation will be required.

This requirement does not affect Canadian-controlled private corporations (CCPCs), not-for-profit organizations, or charitable corporations which have qualified for and received CEWS.

Canada Emergency Rent Subsidy (CERS)

The CERS program provided support for landlords and tenants with respect to the fixed costs of occupying space, such as mortgage interest and property taxes for landlords and rent expenses for tenants. The program was introduced in September 2020 and, as with CEWS, ended on Oct. 23, 2021.

CERS has the same filing deadlines as the CEWS program—all applications must be made no later than 180 days after the end of the claim period. See Chart 1 for qualifying period deadlines ending in calendar year 2021 that are still open as of mid-December 2021.

As with CEWS, CERS claims are considered to have been received for tax purposes and form part of taxable income on the last day of the qualifying period to which the claim relates.

Action item: Review your eligibility for CERS

The revenue decline to be eligible for CERS is the same as for CEWS, so if you have been making claims for CEWS but not CERS, you may have been missing out.

Review your eligible rental or property-owning expenses and the status of open claim periods to ensure that you apply for CERS before the deadline.

Canada Recovery Hiring Program (CRHP)

The CRHP came into effect in June 2021 and was designed to complement and replace CEWS. This program is available to individuals, charities, not-for-profits, and corporations that are Canadian-controlled private corporations (CCPCs).

To qualify, CRHP applicants must have experienced a revenue decline of more than 10% when compared to pre-pandemic levels. This applies for all periods except period 17. In period 17, any revenue decline is sufficient to be eligible for the subsidy.

This program has similar qualification requirements to CEWS, except CRHP provides a subsidy to employers who increase their remuneration amounts between the base four-week period of March 14 to April 10, 2021, and the applicable current qualifying period. Until the period ending Oct. 23, applicants claim the higher of CEWS and the CRHP.

Starting with Period 22 (Oct. 24 to Nov. 20, 2021), only the CRHP will be available.

Claim periods for CRHP are for the same four-week period as for CEWS and all claims have an application deadline of 180 days after the end of the qualifying period.

In addition to the qualifying periods shown in Chart 1, the following additional qualifying periods are available for making CRHP claims for 2021.

Chart 2
CRHP Claim Period Due Date
Period 22 – October 24 to November 20, 2021 Thursday, May 19, 2022
Period 23 – November 21 to December 18, 2021 (projected) Thursday, June 16, 2022

On Oct. 21, the federal government proposed extending the CRHP past Nov. 20, 2021. If approved, the CRHP will be extended for a further six periods, starting with Nov. 21 to Dec. 18, 2021 (as noted in Chart 2) to at least May 7, 2022, with a possible further extension to July 2022, if necessary.

Action item: Review your eligibility for CRHP

If you have experienced a revenue decline of more than 10% (or simply a revenue decline for period 17) and are not a public company, check whether you qualify for CRHP by comparing eligible remuneration paid in the applicable claim period to the eligible remuneration paid in the base period. Any increase in such remuneration will allow you to claim a CRHP subsidy if the CRHP amount is greater than your available CEWS claim, if any.

Canada Emergency Business Account (CEBA) loan

The Canada Emergency Business Account (CEBA) program was introduced on March 27, 2020. The program granted loans for up to $40,000 in mid-2020 and in late 2020, provided an increase of up to $20,000 to be applied for on or before June 30, 2021.

These loans are interest-free until January 2023. If they are not repaid by Dec. 31, 2022, the rate on the loans becomes 5% and the remaining balance is converted to a three-year interest-only loan with the balance in full due on Dec. 31, 2025.

Although the loans being interest-free is a benefit, another huge advantage is that 25% of the first $40,000 and 50% of the next $20,000 (for a maximum amount of $20,000 per applicant) will be forgiven if the balance of the loan is repaid on or before Dec. 31, 2022. No payments are required to be made before that time.

If you received a CEBA loan, you must recognize the forgivable portion of the loan as taxable income in the year it was received. If you were granted a $40,000 loan in 2020 and a $20,000 extension of the loan in 2021, the income inclusion of $10,000 (25% of $40,000) and $10,000 (50% of $20,000) will need to be recorded in 2020 and 2021, respectively.

However, it is possible to defer the income recognition of taxable income by choosing to reduce the expenses in respect of which the loan is received instead of reporting the forgivable amount as income. If those expenses extend into the next taxation year, a portion of the loan intended to cover those future expenses can be deferred to the subsequent taxation year. Given the nature of the loan and the expenses it was designed to cover, it is unlikely that any deferral of income recognition will be available after Dec. 31, 2021.

If the loan is not repaid by the end of 2022 (and therefore, the conditions for a portion of the loan to be forgiven are not met), a tax deduction is available when the loan is repaid, to the extent that the loan was brought into taxable income, or reduced eligible expenses, in a previous taxation year.

Action item: Are you in a position to take advantage of CEBA's loan forgiveness?

Assess your ability to repay the loan to take advantage of its forgivable portion. Some financial institutions may record your $40,000 loan and $20,000 expansion as two separate loans. For the purposes of loan forgiveness, borrowings and repayments on both loans will be aggregated.

New recovery programs starting in 2021

On Oct. 21, 2021, the government announced new programs to provide wage and rent support in a more targeted manner to help the hardest-hit businesses.

These programs provide sector-specific support to tourism and hospitality businesses, as well as to eligible entities in any sector which have experienced sustained revenue declines of at least 50% compared to pre-pandemic activity.

Action item: Is your business eligible for targeted support programs?

These programs are explained in further detail in our Tax Alert, Government announces new more targeted COVID-19 programs to support businesses. Review your business' sustained revenue decline during the first 12 months of the pandemic to determine if you will be eligible for any of these more targeted programs.

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.

We can help you create a strategy that works best for your business.

Rachel Gervais, GTA Tax Service Line Leader
Bruce Sprague, Western Canada Tax Service Line Leader
Greg London, Eastern Canada Tax Service Line Leader

The information in this publication is current as of Nov. 26, 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.

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