Susan Kootnekoff is the founder of Inspire Law, an Okanagan based-law practice. She has been practicing law since 1994, with brief stints away to begin raising children. Susan has experience in many areas of law, but is most drawn to areas in which she can make a positive difference in people’s lives, including employment law. She has been a member of the Law Society of Alberta since 1994 and a member of the Law Society of British Columbia since 2015. Susan grew up in Saskatchewan. Her parents were both entrepreneurs, and her father was also a union leader who worked tirelessly to improve the lives of workers. Before moving to B.C., Susan practiced law in both Calgary and Fort McMurray, AB. Living and practicing law in Fort McMurray made a lasting impression on Susan. It was in this isolated and unique community that her interest in employment law, and Canada’s oil sands industry, took hold. In 2013, Susan moved to the Okanagan with her family, where she currently resides. Photo: Contributed

Kootnekoff: CEWS expanded and extended

Susan Kootnekoff is the founder of Inspire Law, her diverse legal career spans over 20 years

On July 27, 2020, Bill C-20, An Act respecting further COVID-19 measures, received royal assent. This legislation amends the Income Tax Act (Canada) to extend and expand the Canada Emergency Wage Subsidy (CEWS) amid COVID-19.

It also released a backgrounder and a news release.

The changes are detailed and quite complex.

Extension to December 19, 2020

This legislation extends the CEWS until December 19, 2020, with November 21, 2020 – December 19, 2020 being the ninth and final qualifying period. Announcements regarding this last period are to be made at a future date.

Eliminating 30% Revenue Decline

For qualifying periods beginning on and after July 5, 2020 (periods 5 and following), Bill C-20 eliminates the 30% revenue decline that was previously required to qualify for the CEWS. Under the changes, all eligible employers that experience a revenue decline will qualify, as long as the other qualifying conditions are met.

Active Employees vs. Employees on Paid Leave

The changes include, for qualifying periods beginning on and after July 5, 2020, new calculations with different subsidy levels depending on whether the employee is active or is on paid leave. The backgrounder states that beginning on or around August 30, 2020, the CEWS for employees on paid leave will be adjusted to align with the Canada Emergency Response Benefit (CERB).

Two Subsidies: Base & Top-Up

Bill C-20 contains two subsidies: a base subsidy and a top-up subsidy. The amount of the subsidy varies based on the revenue decline and the particular qualifying period. The general idea is that amounts will decline in later periods as it is gradually phased out.

Under these changes, the subsidy is proportional to the employer’s revenue drop. This means organizations must calculate their qualifying revenue carefully. Overestimating a decline in revenue could result in claiming an excess subsidy, and later having to repay it along with interest and penalties.

Extending Employee Eligibility

An employer can claim the CEWS only for eligible remuneration paid to eligible employees.

For qualifying periods beginning on and after July 5, 2020, Bill C-20 changes the definition of “eligible employee” to no longer disqualify employees that are without remuneration for 14 or more consecutive days in an eligibility period.

This means that employees who might work only one week per month will continue to qualify as eligible employees. This change is part of transitioning workers from the CERB to the CEWS.

For qualifying periods up to July 4, 2020 (periods 1-4), an eligible employee is defined as an individual who is employed in Canada and who was paid for at least 14 or more consecutive days in the relevant qualifying period.

Anti-Avoidance

Previously, employers became disqualified to receive the CEWS if action was taken to reduce qualifying revenue for the purpose of qualifying for the wage subsidy. Bill C-20 extends this disqualification to employers who not only take action to qualify for the wage subsidy, but who take action to increase the amount of the subsidy received.

Applying

Applications for the CEWS may be made online and filed with Canada Revenue Agency for each qualifying period. Bill C-20 extends the application deadline to January 31, 2021 from October, 2020.

The individual with whom “principal responsibility” for financial affairs resides must attest that the application is “complete and accurate in all material respects.”

Further Information

There is no cap on the number of employees for which an employer can claim a subsidy, nor is there a limit on the total amount of the subsidy that an eligible entity may claim.

CEWS “determinations” may be challenged by filing a notice of objection under the Income Tax Act’s usual dispute resolution process.

For further information on the amendments, readers ought to consult a tax lawyer or other tax advisor.

The content of this article is intended to provide very general thoughts and general information, not to provide legal advice. Specialist advice from a qualified legal professional should be sought about your specific circumstances.

If you would like to reach us, we may be reached through our website, at www.inspirelaw.ca.

In case you missed it?

Temporary layoffs during COVID-19

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