COVID-19 Federal Benefits and Supports – CEWS Wage Subsidy Updates

By: Eeva Harrop, CPA, CA, MSc, TEP

and Nizam Shajani, CPA, CA, MBA

On July 17^th the Department of Finance announced changes to the Canada Emergency Wage Subsidy (CEWS) program which many are calling CEWS 2.0. The good news is that the program is being extended until November 21, 2020 (and potentially until December 19, 2020) so the government is providing additional support to businesses during these challenging times. The bad news is the calculations to determine the subsidy amount under CEWS 2.0 are a lot more complicated.

Highlights

• Both the original and CEWS 2.0 are based on maximum remuneration per employee up to $1,129 per week. (at 75% of 1,129 this equals $847 which was the maximum amount originally)
• CEWS 2.0 has two parts: base subsidy and a top-up subsidy
• All eligible employers with any revenue decline can benefit (the minimum 30% revenue deduction no longer required)
• Any employee working in Canada may now be eligible
• Subsidy amount is based on a sliding scale based on actual revenue decreases
• The amount of the subsidy will gradually be reduced between July and October 2020
• For periods 5 and 6, the employer can choose the method that results in the highest subsidy amount. This will require a calculation of the subsidy using the original method and CEWS 2.0
• The employer can elect to use a cash or accrual method to determine revenues; however, the employer cannot switch methods afterwards

Penalties

An employer will have to return/repay all or part of the wage subsidy where the wage subsidy should have been less than what was claimed. Interest may be applied to the excess wage subsidy received. Penalties may be applied in the case of fraudulent claims.

Be sure to keep your records and calculations as the CRA will perform CEWS audits likely starting in 2021. Next will come CRA objections! We will no doubt be dealing with CEWS for a few years.

Shajani LLP can help!

As these calculations are more complicated and considering the different options, it is important to ensure you received the greatest subsidy amount, Shajani LLP can help.

In addition to the complex calculation, Shajani LLP is able to offer the following solutions:

• Optimization of the CEWS for each employee for each week to receive the maximum benefit available
• Built-in deeming provisions to automatically claim CEWS based on prior period qualifying revenues
• Built-in deeming provisions to maximize the revenue reduction percentage for each qualifying period
• Maximizing the “pre-crisis” baseline remuneration for each employee based on all four period options
• Determining if any employee is without remuneration for 14 consecutive days
• Flexibility to choose between the “General” and the “Alternative” baseline revenue approach
• Calculate claims from Mar 15, 2020 to Aug 29, 2020 (and until Dec 31, 2020, if extended)
• Wage subsidy amounts for both active and furloughed employees
• Supports payroll frequency of weekly, biweekly, semi-monthly, and monthly (or enter daily amounts)
• Summary reconciliations for the employees to streamline 2020 T4 reporting

Other resources

The Department of Finance’s Backgrounder on CEWS 2.0: https://www.canada.ca/en/department-finance/news/2020/07/adapting-the-canada-emergency-wage-subsidy-to-protect-jobs-and-promote-growth.html.

Tax Legislation governing CEWS 2.0 and related changes – https://parl.ca/DocumentViewer/en/43-1/bill/C-20/third-reading

This information is for discussion purposes only and should not be considered professional advice. There is no guarantee or warrant of information on this site and it should be noted that rules and laws change regularly. You should consult a professional before considering implementing or taking any action based on information on this site. Call our team for a consultation before taking any action. © 2020 Shajani LLP