December 12, 2020,

Dear Clients & Friends,

Every holiday season has something special about it and this year feels particularly different, yet meaningful.  Although the way we will be celebrating the holidays this year is very different from what we are accustomed to, we can still connect with our loved ones and find comfort in creating new traditions and find new ways of celebrating.   It has been an honour to serve you over the years; and especially over this past year.  During 2020, we were pleased to provide you with up-to-date information on the Government’s Covid-19 Economic Plan and help you navigate through the financial changes that you incurred during the pandemic.   Our goal has always been to put our clients first by ensuring that we listened to your needs, allowing you to spend quality time with your family.  If there is one thing that we have learned this year, it is that time spent with our loved ones is the greatest gift of all.

As we approach the end of the year, we would like to remind you to gather your documents for your personal taxes. Enclosed you will find an income tax return checklist to help you prepare your documents for the upcoming tax season.  Similar to last year, you have the option of sending your files digitally (either via dropbox, google drive, box or secured email).  Please do not hesitate to contact us should you require any assistance.  As a small token of appreciation, you will find enclosed our 2021 desktop calendar.

We thank you for your loyalty and look forward to further growing our relationship into the New Year!

Kindly note that our office will be closed for the holiday season from Thursday, December 24, 2020 at 2:00 pm and will reopen on Monday, January 4, 2021.

On behalf of my family and my staff, I wish you and your family happy holidays and a prosperous  New Year!

Please connect and follow the links to my social media at your convenience (Facebook, Twitter, LinkedIn, Instagram) to stay fully updated on COVID-19 and tax planning tips for individuals & businesses.

   

 

We have been working very hard in providing personal tips & accounting, tax and business content on social media.   If you get an opportunity, please also provide a google review available at the following link:

AR Jaffer Professional Corporation Chartered Professional Account Google Review

 

Covid-19 Updates:

The federal government has provided some recent updates on the various benefits related to COVID-19.  We can assist you with the application for these benefits.  The main items discussed in this newsletter are:

1. Canada Recovery Benefit (CRB)
2. Updates to the Canada Emergency Business Account (CEBA)
3. Canada Emergency Rent Subsidy (CRS)
4. Canada Emergency Wage Subsidy Update (CEWS)
5. Ontario Main Street Relief Grant ($1,000 maximum): PPE Support

Note that all the COVID-19 updates are available on our website at www.arjcpa.ca

 

For Individuals:

Canada Emergency Response Benefit (CERB) & Transition to the Canada Recovery Benefit (CRB):

• Even though the CERB has ended, you can apply for a period retroactively. The CRA is continuing to accept and process retroactive applications for period 7 (August 30 to September 26, 2020) through the CRA’s My Account or automated toll-free phone line.
• The new Recovery Benefits known as the Canada Recovery Benefit (CRB) are available between September 27, 2020 and September 25, 2021.

CRB:

• The Canada Recovery Benefit will provide eligible workers with $1,000 for a 2-week period ($900 after taxes withheld) for up to 26 weeks for those who are not employed or self-employed due to COVID-19 and who are not eligible for EI, or had their employment/self-employment income reduced by at least 50% due to COVID-19.
• This benefit will be paid in two-week periods.
• If your situation continues past 2 weeks, you will need to apply again. You may apply up to a total of 13 eligibility periods (26 weeks) between September 27, 2020 and September 25, 2021.
• The Canada Recovery Sickness Benefit (CRSB) will provide $500 per week (taxable, tax deducted at source) for up to a maximum of two weeks, for workers who are unable to work for at least 50% of the week because they contracted COVID-19, self-isolated for reasons related to COVID-19, or have underlying conditions, are undergoing treatments or have contracted other sicknesses that, in the opinion of a medical practitioner, nurse practitioner, person in authority, government or public health authority, would make them more susceptible to COVID-19. This benefit will be paid in one-week periods.

If you require assistance with the application process, please contact our office.

Full details are available on the CRA Website at:   https://www.canada.ca/en/department-finance/economic-response-plan.html#individuals

 

For Businesses:

 

1 – The Canada Emergency Business Account (CEBA) Update:

New CEBA:

• As of December 4, 2020, CEBA loans for eligible businesses will increase from $40,000 to $60,000.
• Applicants who have received the $40,000 CEBA loan may apply for the $20,000 expansion, which provides eligible businesses with an additional $20,000 in financing.
• All applicants eligible for the CEBA loan have until March 31, 2021, to apply for the $60,000 CEBA loan or the $20,000 expansion.
• Every applicant must meet the following criteria:

1. Has an active CRA Business Number (BN) with an effective date of registration on or prior to March 1, 2020.
2. Has an active business chequing/operating account with the Lender at the time of applying for CEBA. Note: If Borrower currently does not have a business chequing/operating account the Borrower must create one at their primary financial institution before applying for CEBA.
3. Has not previously used the Canada Emergency Business Account Program (the “Program”) and will not apply for support under the Program at any other financial institution.
4. Intends to continue to operate its business or to resume operations.

• Business owners can apply for support from the Canada Emergency Business Account through their banks and credit unions.  An attestation with detailed qualification criteria must be signed prior to submitting the application
• Further information is available at:   https://ceba-cuec.ca/

Original CEBA:

• The original $40,000 CEBA has been extended to December 31, 2020
• The qualification requirements are as follows:
  • The Borrower is a Canadian operating a business as of March 1, 2020.
  • The Borrower has a CRA business number and has filed a 2018 or 2019 tax return.
  • Demonstrate that your organization has paid between $20,000 to $1.5 million in total payroll in 2019.
  • Applicants without at least $20,000 in payroll in 2019 will have to demonstrate having eligible non-deferrable expenses between $40,000 and $1,500,000 in 2020.  Eligible non-deferrable expenses could include costs such as rent, property taxes, utilities, and insurance. Expenses will be subject to verification and audit by the Government of Canada.
  • As of June 26, 2020, businesses eligible for CEBA now include owner-operated small businesses that do not have a payroll, sole proprietors receiving business income directly, as well as family-owned corporations remunerating in the form of dividends rather than payroll.
• The government will then provide interest-free loans of up to $40,000to small businesses and not-for-profits, to help cover their operating costs during a period where their revenues have been temporarily reduced.
• Repaying the balance of the loan on or before December 31, 2022will result in a loan forgiveness of 25 percent (up to $10,000).
• Business owners can apply for support from the Canada Emergency Business Account through their banks and credit unions.
• Further information is available at:   https://ceba-cuec.ca/

 

2 – Canada Emergency Rent Subsidy (CERS)

• Structured in a manner similar to the Canada Emergency Wage Subsidy (CEWS), the CERS takes over where the Canada Emergency Commercial Rent Assistance program (CECRA) left off.
• Under the CERS, qualifying organizations that have suffered a decline in revenue would be eligible to receive a subsidy in respect of certain of their real property-related expenses. There are, however, key differences between the CECRA and the CERS, including:
• Where the CECRA was only available in respect of small business tenants, the CERS can be claimed by businesses, not-for-profits and charitable organizations that own the real property that they use in the course of their ordinary activities, to assist in covering interest expenses on mortgages, insurance expenses and property taxes, except where that real property is used primarily to earn rental income from arm’s length parties, which disqualifies most commercial landlords from applying for the CERS.
• Unlike the CECRA, which was only available for small business tenants who paid a maximum of $50,000 in gross rent per location, the CERS can be claimed by renters and property owners of all sizes (assuming all other eligibility criteria are met).
• The CERS will be administered by the Canada Revenue Agency (CRA), as opposed to the Canada Mortgage and Housing Corporation.
• CERS provides benefits directly to renters, without requiring landlords’ participation).
• CERS is broken down into 2 subsidies:
  • the base subsidy and
  • the top-up subsidy, referred to as the “Lockdown Support”.
• Base subsidy – A maximum base subsidy of up to 65% of qualifying rent expenses paid, or deemed to be paid  in the qualifying period will apply until 19 December 2020. Similar to CEWS, the subsidy will be calculated on a sliding scale that gives more support to those entities with higher rates of revenue decline
• Lockdown Support – A 25% subsidy is available for eligible entities that have experienced any revenue drop (i.e., 1% drop in revenue would be sufficient) and are subject to a public health restriction that has been introduced in response to the COVID-19 pandemic (e.g., restaurants, fitness studios or retail stores that have temporarily shut down or have had their activities significantly limited by a mandatory public health order for a least one week). The Lockdown Support is adjusted according to the number of days in the qualifying period during which a particular property is subject to the public health restriction.
• For the base subsidy, the maximum amount of qualifying rent expenses that can be claimed for each qualifying period is $75,000 per location. The maximum amount of qualifying rent expenses that can be claimed for the affiliated group of entities for a qualifying period is $300,000. Accordingly, the maximum subsidy amount available under the base subsidy is $195,000 per affiliated group of entities per qualifying period (as described below).
• For the Lockdown Support, the maximum amount of qualifying rent expenses that can be claimed for each qualifying period is $75,000 per location. There is no overall cap that applies for an affiliated group of entities. Accordingly, the maximum Lockdown Support available is $18,750 per location for each qualifying period, but there is no upward limit for the amount of Lockdown Support available for an affiliated group (as described below).
• Organizations would be able to make claims retroactively for the period that began September 27.   Similar to CEWS, the CERS will be available until June 2021.

 

Eligible expenses if you rent a qualifying property

1. Rent (including rent based on a percentage of sales, profit or similar criteria)
2. Amounts required to be paid or payable by you under a net lease (either to the lessor or a third party). These required amounts might include:
   1. base rent
   2. regular payments for customary operating expenses, such as

i.    property insurance

ii.    utilities

iii.    common area maintenance

1. 1. property and similar taxes, including school and municipal taxes
   2. regular payments to the lessor for customary ancillary services

 

Eligible expenses if you own a qualifying property

1. Property and similar taxes:
   1. Includes school taxes and municipal taxes, if these are part of your property tax assessment
2. Property insurance
3. Interest on commercial mortgages for the purpose of purchasing real property
   1. Your mortgage amount cannot exceed the lesser of:

i.the lowest total principal amount secured by one or more mortgages on the property at any time after it was acquired or

ii.    the cost amount of the property

 

Further information is available at:   https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-rent-subsidy.html

 

3 – Canada Emergency Wage Subsidy (CEWS) Update:

 

·Changes to CEWS as of November 19, 2020:

i.        the subsidy is extended to June 2021

ii.        the maximum subsidy rate for periods 8 to 10 will remain at 65% (40% base rate + 25% top-up)

iii.beginning in period 8, the top-up rate and base rate are is now calculated using the same one-month revenue drop

iv.for periods 8 to 10, use the new top-up calculation or the previous 3-month average drop, whichever works in your favour

v.the deadline to apply is January 31, 2021, or 180 days after the end of the claim period, whichever comes later

vi.        starting in period 9, the calculation for employees on leave with pay now aligns better with EI benefits

• • You can now calculate pre-crisis pay (baseline remuneration) for employees who were on certain kinds of leave, retroactive to period 5.
  • The program will be available through My Business Account or through the Represent a Client service for Accountants.
  • There will be an automatic audit for all employers to ensure compliance with the program.
  • Please contact our office for assistance and we will prepare the calculations and applications for you.

Full details on the calculator and process are available at:  https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-wage-subsidy.html

 

4 – Ontario Main Street Relief Grant: PPE Support

 

Main Street Relief Grant for Personal Protective Equipment (PPE) provides up to $1,000 for PPE costs to eligible small businesses across Ontario with 2 to 9 employees.

 

Eligibility:

To be eligible, your business must have two to nine employees and be in one of the following sectors:

• retail
• accommodation and food services
• repair and maintenance
• personal and laundry services
• gyms and yoga studios

 

Grant Amount:

Eligible small businesses will get one-time grants of up to $1,000.

 

Documents Required:

You will need to submit receipts or proof of costs for PPE purchased since March 17, 2020. This includes:

• gloves, gowns, face shields, eye protection, masks, sanitizer, sanitizing wipes
• thermometers, temperature monitors or cameras
• physical changes, including the installation of hand sanitizer stations and plexiglass dividers
• signs to guide or inform customers and employees

Please contact us if you require assistance with the application process.   Additional information is available at:  https://www.app.grants.gov.on.ca/msrf/#/

 

5 – Advisory, Tax Planning and Cash Flow Planning

Whether you are an individual tax payer, sole proprietor or corporate business owner, many of us have experienced a challenging few months.  As part of our commitment and service delivery to our clients, with the recent pandemic, we have been working with our clients on the following:

1)Business Financing which includes

a.$100k BDC working capital loan application

b.Bank loan proposals & applications

c.Lines of credit applications

d.Applications to various government loan programs in response to the COVID-19 pandemic

e.Preparation of business plans and cash flow projections

2)Cash Flow Planning & Budgeting

3)Tax Planning and Corporate Restructuring

4)Net Worth Analysis and Planning

5)Strategies to achieve your short term and long term goals

 

Please see our website for further details at https://www.arjcpa.ca/business-advisory-services/

Stay Safe!

Best regards,