Update to wage subsidy program

MARCH 30, 2020

Very short note as we wait for the government to clarify the rules concerning the enhanced small business loan programs and the 75% wage subsidy program. We will have more details on this shortly after the information is released

There is one important clarification that did come out last week on the existing 10% wage subsidy program

Partnerships, Trust and Individuals

The legislation indicates that partnerships, trusts and individuals that employ others will be eligible for the 10% wage subsidy. The initial language indicated that only qualified corporations or non profits and charities qualified. The final legislation makes more sense and broadens the types of entities that will qualify. We believe that those who employee nannies or house keepers that receive T4s qualify. This will be particularly important to understand if the rules for the 75% subsidy mirror the rules for the 10%.

Canada Emergency Loan Amounts for Small Business

One new detail was revealed with respect to the $40,000 loan program: to qualify corporations must show that they had payroll of between $50,000 and $1 million in the 2019 year.

Companies that qualify you should take advantage of this program. Your bank will likely make it easy to complete. And, the win is that upon repayment $10,000 is forgiven.

For mid sized corporations this program doesn’t apply – the programs from BDC and EDC are more relevant for these organizations.

Harmonized Sales Tax

Last week we mentioned that the government has allowed taxpayers’ to delay HST remittances. We want to remind you that HST is collected as agent for the government and accordingly directors are liable for HST not remitted. So, for many of you using the cash flow saved from HST may make sense – but tread carefully and monitor where you stand on this liability. Reducing corporate income tax withholdings on the other hand always makes sense – this liability does not flow through to the directors in most circumstances.

Remember that the delay on HST is only until June 30, 2020 – although it may be extended. We worry that for service businesses with large HST remittances this cash flow saving could haunt some taxpayers when the recovery is happening.