As the COVID-19 pandemic is sweeping the nation, at Advotax Law we get daily calls from small business owners who are forced to close their shops and offices, abandon their construction projects, terminate their contracts. Employers want to avoid layoffs but do not know if they can afford to do so. People are anxious and overwhelmed by the tsunami of information they receive.
In order to support our small business community, we will be posting short summaries of the most important changes in the law that relate to tax and financial assistance for small business owners impacted by COVID-19.
Our first post is about the Canadian Emergency Response Benefit, an income support payment program and its key differences from the Employment Insurance program. Every small business owner in Canada should know about this program, both for their own sake and for the sake of their workers and employees.
What is the Canadian Emergency Response Benefit ("CERB")?
The CERB is a monthly income support payment for workers impacted by COVID-19, including individuals who are not otherwise eligible for Employment Insurance ("EI") benefits.
As such, for the next several months, the CERB will become a critical source of income support for many self-employed individuals (contractors, freelancers, sole-proprietors) as well as for employees, including those who do not qualify for EI benefits (for example, because they did not accumulate enough insurable employment hours).
What is the law that sets the rules for the CERB?
On March 25, 2020, the Federal Government passed Bill C-13, An Act respecting certain measures in response to COVID-19. This Bill enacts the Canada Emergency Response Benefit Act.
What is the amount of the CERB?
The amount of the income support payment is $2,000 per 4 weeks period.
For how long can the CERB be available to me?
The CERB can be available to qualified workers for up to 16 weeks.
Am I eligible for the CERB?
In general terms, you should be eligible for the CERB if:
you are individual over the age of 15;
you are a resident of Canada;
you have earned at least $5,000 from employment, self-employment or in EI maternity or paternity benefits either (a) during 2019 or (b) in the 12-month period prior to the date of your application;
you ceased working for reasons related to COVID-19 for at least 14 consecutive days during the period between March 15, 2020 and October 3, 2020; and
you received no other income and no EI benefits during the period when you ceased working (subject to limited exceptions).
Am I eligible for the CERB if I stopped working voluntarily?
Can I be eligible for the CERB if I operate my small business through a corporation and earn a salary from the corporation?
What are examples of situations where someone ceases working "for reasons related to COVID-19"?
you cease working because you are sick, quarantined, or you are taking care of someone who is sick with COVID-19.
you cease working because you must stay home to care for children because of COVID-19 related school closures;
you are still employed at your job, but your employer had asked you not to come to work because there is not enough work;
you are a self-employed person and you had to close your place of business or lost contracts with your customers as a result of COVID-19 pandemic.
I had to stop working for reasons related to COVID-19, but I still earn a small interest income from my investment. Does the interest income disqualify me from being eligible for the CERB?
It is not clear yet. The rules currently make you ineligible if you earn other employment income, business income, or receive EI benefits. However, the Minister may add other sources of income that would affect your eligibility.
I operate my business through a corporation and had to cease working. In 2019 and 2020, I only received dividends from my corporation. Would my dividends income count towards the $5,000 CERB eligibility earning threshold?
It does not appear that dividend income would make you eligible for the CREB. In order to be eligible for CERB, you must earn at least $5,000 in employment or self-employment income or receive EI benefits.
How is the CERB different from EI?
Some employees and self-employed individuals may qualify for both programs, but can only receive benefits under one program at a time. If you are receiving EI, you will not qualify for CERB and vice versa.
You may, however, receive benefits under both programs consecutively in any order. For example, you may first receive CERB for 16 weeks and then, if you are still meet all the EI eligibility criteria, you may apply for EI.
The following chart highlights the difference between the two programs.
How do I apply for CERB?
You can apply online or over the phone.
Online applications become available starting April 6, 2020 through CRA My Account portal.
If you do not have a CRA My Account, or if you have trouble logging in, it is very important to set one up or restore your access. For assistance, follow these instructions under the heading "How to Apply".
If you cannot apply online, a dedicated phone line for applications by phone will also be available starting April 6, 2020.
Which documents do I have to provide to prove that I ceased to work for reasons related to COVID-19 and earned no other income?
We do not yet know the application requirements, but we will know them in early April.
If you receive benefit support payments but the Minister later determines that you were not entitled to them, you will have to repay the payments to the Minister.
When can I apply for the CERB?
You may apply as soon as the applications become available online through CRA My Account or by phone starting April 6, 2020.
You must apply for the CERB before December 2, 2020.
After I submit my application, how long would I have to wait for the first payment?
You can expect a payment in 3 days if you signed up for a direct deposit, and approximately 10 days if you have not.
What period would the payment cover?
Each payment of the CERB covers a 4 weeks period.
What happens after 4 weeks?
If your situation continues after 4 weeks, you may apply again for an additional 4 weeks period.
Can I apply for the CERB if I have already applied for EI but have not started receiving my benefits?
As stated above, you cannot be eligible for both programs at the same time. However, due to the large backlog of EI applications, your application will be redirected and processed under the CERB program instead.
Nothing in this article constitutes legal advice and no solicitor-client relationship is created. If you require legal advice pertaining to your specific situation, please contact our tax lawyer.
Please note that this post is only as current as its publishing date indicates, but the relevant rules change constantly.
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