DFK Tax Newsletter


Spring 2021 Edition - May 19, 2021 - Terry Soloman, CPA,CA, TEP, Partner Tax Services  MRSB Group

Budget 2021 Business Emergency Support Measures

By Terry Soloman, CPA,CA, TEP, Partner Tax Services  MRSB Group

The first federal budget since 2019 was delivered by the Honorable Chrystia Freeland, Deputy Prime Minister and Minister of Finance on April 19, 2021. The budget included a significant number of proposed program initiatives.  This article will highlight some of the emergency business support measures.

Canada Emergency Wage Subsidy (CEWS) Program

By now, many in the business sector are aware of the CEWS program. Budget 2021 proposes several changes in order to phase out this program including:

  • A gradual reduction in the maximum weekly benefit per employee in Period 18 (commencing July 4) through Period 20 (ending September 25) based on revenue decline. This reduction impacts both the base subsidy and the top up subsidy formulas.
  • A minimum revenue reduction of 10% commencing in Period 18 in order for an employer to qualify.
  • Employers must demonstrate a revenue reduction under one of two approaches. For example, for Period 18, under the general approach July 2021 revenue is compared to July 2019 or June 2021 revenue is compared to June 2019. Alternatively, July or June 2021 can be compared to the average of January and February of 2020. Once the approach is chosen, the employer must continue to use the same approach. 
  • The Budget also allows for a possible extension by regulation of the CEWS program by adding Period 21 (September 26 – October 23) and Period 22 (October 24 – November 20).
Canada Recovery Hiring Program (CRHP)

Budget 2021 introduced a new program, the CRHP, to incentivize business to hire back laid off employees as well as to hire new staff. The CRHP is an alternative to CEWS, and is available from June 6 to November 20, 2021 using the same qualifying periods as CEWS. 

The subsidy for the first three periods, June 6 – August 28, will be 50% of the employer’s incremental remuneration to eligible employees, excluding furloughed employees. The CRHP subsidy percentage will then to decline to 40%, 30% and 20% for the final three periods of the program. The baseline period to measure the increase in incremental wages will be the period from the March 14 to April 10, 2021.

Eligible employers for the CRHP must be a “qualifying recovery entity” and many of the criteria are similar to CEWS. However, one difference of note is that in the case of a corporate employer, the entity must be a Canadian-controlled private corporation, or CCPC. This additional condition is presumably to disqualify public corporations from this measure as well as non resident controlled corporations. Again, there are minimum revenue decline criteria that generally match the approach under CEWS. Similar to CEWS, amounts received under this program would be taxable to the recipient employer.

Eligible employers must apply for the CRHP no later than 180 days after the end of the qualifying period.

Eligible employers can claim either the CRHP or the CEWS for a particular qualifying period, but not both programs.

Canada Emergency Rent Subsidy (CERS)

Similar to the CEWS program, Budget 2021 proposes to gradually phase out the CERS program in Periods 18 to 20, and for these three periods overall eligibility will be subject to a minimum revenue decline of at least 10%. The maximum CERS subsidy for Period 17 will be 65%, declining to 20% by Period 20. In calculating revenue declines, the same reference periods as CEWS apply to the CERS program.

The expense cap of $75,000 per location and the overall expense cap of $300,000 to be shared amongst affiliated entities per qualifying period remain.

The 25% lockdown support top up CERS subsidy will also remain for the balance of the CERS program. This additional amount applies where the qualifying tenant is required to cease or significantly limit their activities due to a public health order.

Immediate Expensing of Certain Eligible Property (EP)

Generally, businesses that make capital purchases are limited by the Capital Cost Allowance (CCA) rules in how quickly the expenditure can be expensed for tax purposes. Budget 2021 proposes a temporary immediate CCA deduction in the current year for certain capital acquisitions made by a Canadian-controlled private corporation:

  • Applies to acquisitions of up to $1.5 million per year on or after April 19, 2021 which are available for use before January 1, 2024. The ability to fully expense the acquisition is limited to the year it becomes available for use.
  • Applies to all capital purchases other than acquisitions in Class 1 to 6, 14.1, 17, 47, 49, and 51.

The $1.5 million annual limit must be shared among associated corporations and is prorated for short tax years. If a CCPC acquires less than $1.5 million of eligible property in a year, the unused annual limit cannot be carried forward.  Further restrictions apply to acquisitions from a non arms length party and acquisitions acquired on a tax deferred basis.

For example, it appears the immediate expensing would apply to purchases such as general office equipment, computer hardware, leasehold improvements, and vehicles.

This article is intended to provide a high-level overview of these programs and does not address all business related budget measures. Please contact your local DFK office to see how these measures may impact your business.