While for most people December means a year end, but that doesn’t mean that you stop thinking about the business side of your taxes. 2020 introduced a long slew of challenges for businesses, but also some opportunities to make changes and considerations. On the tax side of things, there have been some notable changes as well, and some things to consider for your 2021 year as it goes ahead. From Work From Home shifts, to loans from the government, we have compiled some 2021 considerations for you and your business.
Many of the below will require up to date records and bookkeeping. Should you require assistance, we can help!
Canada Emergency Rent Subsidy (CERS)
For a lot of businesses, one of their largest monthly expenses is their rent. Whether it is an office space, or a storefront in a busy shopping mall, many businesses have seen a slow to their traffic, or an altogether halt. As a result, many businesses have been having a hard time with accommodating their rent.
The Canadian government, seeing this as an issue, originally launched the Canada Emergency Rent Subsidy, or CERS, to alleviate this issue, allowing landlords to apply for the subsidy to cover lost income from tenants. After some feedback and discussion with various business committees, the Government further expanded the plan, allowing businesses to apply for it directly. After a successful application the money is sent to the renter or property owner, without the need to have the Landlord apply and participate. This freed up businesses to support their locations and more easily weather the storm.
Similar to EI, the process is handled by applying for periods, where you will have to submit data showing your loss of income and revenue, and showing the rent needed during those periods. It will allow you to claim up to $75,000 per location, or $300,000 across all your locations, per period. It can be for your rent, necessary expenses as a result of the property (property insurance, utilities, or common area maintenance and upkeep). You can’t use it for sales taxes (such as GST/HST and provincial sales taxes), damages, interest or penalties on unpaid amounts, or other special amounts unfortunately. It is also important to note that these must be arm’s length entities, that is not a personal property, cottage or residence used by you, or family.
You can see if you qualify here.
Canada Emergency Business Account (CEBA)
Rent isn’t the only place businesses might be suffering. From salaries, to operational costs and necessary upkeep, Canadian Businesses have been struggling to get through the COVID-19 Pandemic. To alleviate this, the Canadian government has established the Canada Emergency Business Account, or CEBA, to assist in keeping Canadian Businesses afloat. This is an interest-free load available to Canadian businesses affected by the pandemic, originally offering up to $40,000 in support, and expanded in December to $60,000. And if you pay it back by December 31st, 2022, there is optional loan forgiveness as well.
Now, you can’t start a business and be eligible for this support, it is only available to businesses in operation before March 1st, 2020. If you opened during the pandemic, check out the HASCAP, which we will discuss below.
There are two streams of application you will apply for, depending on what your needs will be. The first is the Payroll Stream, which is in reference to businesses with employee income paid out in 2019 between $20,000 and $1,500,000. The next stream, the Non-Deferrable Expense stream, which is for Applicants with $20,000 or less in total employment income paid in 2019. To be eligible, you must have a CRA Business Number, have an active bank account (chequing or operating account), not previously applied, and must plan to continue or resume operations following the pandemic. If you don’t have a banking account, you must open one prior to applying for the loan.
The loan forgiveness also helps Canadians, by allowing a percent to be forgiven. If you just borrowed the $40,000 loan (or less), and are able to repay by December 31st, 2022, you are eligible for 25% of the loan to be forgiven. Assuming you take the entire $40,000, that would be $10,000 in forgiveness. If you borrowed the original $40,000, and take the additional $20,000 offered in December, you are eligible for 25% of the $40,000, and 50% of the $20,000. This would mean if you took both amounts, you would be looking at a forgiveness of $20,000. If you have already paid back your original loan and take the extension, you are still eligible for 50% of the additional amount borrowed.
The deadline to apply is March 31st, 2021.
Highly Affected Sectors Credit Availability Program (HASCAP)
For small to medium sized businesses that have seen a 50% decrease in revenue, another option is the the Highly Affected Sectors Credit Availability Program, or HASCAP. These are Government of Canada and BDC guaranteed, low interest loans, supplied through a financial institution of your choice. They have a 4% interest rate, and an option to have 10 years to pay back the loan as is necessary. It also included a potential 12-month postponement of principal payments. These are also one of the most extensive loan programs, offering up to $1,000,000 in loans as are needed for your business.
Work From Home
The last consideration that has greatly changed due to 2021 is that businesses are still seeing many staff members working from home. Some businesses are considering making this a more permanent solution and moving to using their offices less. One of the big changes has been how businesses deal with Work from Home expenses. This will mean the issuing of T2200s to staff, something some businesses have never done before. This means an employee working from home can write off part of their operating cost to do so, from utilities to internet and cell phone.
Another consideration is some businesses are directly reimbursing staff for purchases for their work from home solution. This might come in the form of desks, computers, or other accessories to make the situation easier. These are, as always, a taxable benefit and should be tracked as such, but something to keep in mind.
If you are an employee looking for suggestions for your 2020 tax returns in regards to, you can still do your work from home taxes through a T2200, but if you don’t want to you can apply for the $2 a day work from home credit here.
The Canada Revenue Agency offers a guide for people looking to more easily explore what they have available as work from home taxable benefits, which is here.
As with a lot of the 2020 tax returns, the Canadian Government has been updating this, so this document is likely to change and adapt as time goes on. If you have any questions we would be happy to sit down and discuss with you your business needs. We offer new business clients a 30 minute sit down to get to know you and your business better, so we can help you understand which of these will be beneficial to you as a business owner.