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On April 19, 2021, the Deputy Prime Minister and Finance Minister, the Honourable Chrystia Freeland, presented Budget 2021: A Recovery Plan for Jobs, Growth, and Resilience, to the House of Commons.

No changes were made to personal or corporate tax rates (other than a temporary measure for zero-emission technology
manufacturers), nor to the inclusion rate on taxable capital gains.

Some highlights include:

A. Personal Measures

• The Canada Recovery Benefit and related programs will be extended.
• Individuals will have the option to claim a deduction in respect of the repayment of a COVID-19 benefit amount for the year when the benefit was received.
• Access to the disability tax credit will be broadened.

B. Business Measures

• The Canada Emergency Wage and Rent Subsidies (CEWS and CERS) will be extended.
• The Canada Recovery Hiring Program was introduced.
• The ability to immediately expense 100% of many capital asset purchases was introduced.
• The disclosure requirements for aggressive tax planning and filing positions will be expanded.

C. International Measures

• A 1% tax on the value of vacant or underused real estate owned by non-residents will be implemented.

D. Sales and Excise Tax

• Access to the GST/HST New Housing Rebate will be broadened for co-owners.
• A new tax of up to 10% will apply to the purchase of luxury vehicles, aircrafts or boats.

E. Electronic Filing, Payments and Certification

• Some CRA communications will be undertaken electronically without the taxpayer’s authorization.
• Certain levels of payments will be required to be made electronically.

To access our in-depth commentary please click here.

Dear Client:

We are pleased to provide a “Personal Income Tax Organizer” form to help you compile the information necessary for preparation of your 2020 income tax return.  Please complete a separate organizer for each individual in your household (who is filing a tax return).

As well, please advise us of any changes to your circumstances – for example changes to address, marital status, phone or email contact info, April vacation plans, etc.

There have been relatively few tax-related changes during the year.  However, we do wish to bring the following to your attention:

• The climate action incentive has increased modestly for the year.  If you have joint custody of children, arrange in advance who will claim them for purposes of that credit.
• In light of the pandemic, CRA has provided an alternative method to calculate workplace at home expenses for 2020.  We will need the exact number of days worked from home, excluding any non-working weekends, vacation days or paid sick/other leaves of absence.
• The new credit advertised by the government, in respect of digital news subscriptions, is effective for 2020.  Please provide related receipts from your provider.

When your information is ready, please send it to our office (or drop it off with reception).  Alternatively, if all your records are electronic, you can email admin@ck-ca.com or use the more secure File Share Centre service (a link is in the top right hand corner of our website or below the contact information in emails).

Please note that if documents are delivered to us after April 15, we cannot guarantee that the returns will be filed before the April 30 filing deadline.

We will contact you by telephone if additional details are required and/or once the returns are drafted.

The organizer can be accessed by clicking here.

You may have recently received your T4A slip relating to the Canada Emergency Response Benefit (CERB) completing your documents to file your 2020 tax return.  However, it has been noted that individuals who repaid their CERB and other benefits on or before December 31, 2020 may have received inaccurate T4A slips related to the repayments.  In certain cases these repayments have been allocated by CRA as a tax installment or part of another account.

To assist hardest-hit businesses with covering operational costs, the Business Development Bank of Canada (BDC) has been mandated by the Government of Canada to provide a guarantee to the financial institutions providing low interest loans ranging from $25,000 to $1,000,000 for qualifying businesses, called the Highly Affected Sectors Credit Availability Program (HASCAP) Guarantee.  Repayment terms are up to 10 years, with principal repayments deferred for 12 months. Interest rates are expected to be 4%.

Applications are done directly through financial institutions, with the program being available until June 30, 2021.

To see if your business is eligible and to learn more about the program (including details on how to apply), please refer to the link below:

https://www.bdc.ca/en/special-support/hascap

COVID-19 continues to challenge us every day.  While the government assistance/programs pertaining to salary of employees of affected businesses provided welcome relief, it has also created additional reporting requirements about which employers must be aware.

There were two payroll related programs, the Temporary Wage Subsidy (“TWS”) and the Canada Emergency Wage Subsidy (“CEWS”).  The TWS provided a less significant advantage, in the form of a 10% retention of income tax withheld from employee gross salary between March 18 to June 19, 2020 (up to certain limits).   The CEWS, meanwhile, is still available (revised and extended to June 2021).  It originally allowed for federal support covering up to 75% of salary costs (again subject to certain limits).

These two salary related programs have created compliance requirements for purposes of 2020 T4 return preparation.

Firstly, new Form PD27 must be completed to report any TWS benefit.  This form requires detailed information, organized by pay period, regarding salary, statutory withholdings, and wage subsidy claimed.  Secondly, the T4 slips themselves must now detail the employee’s wages paid during the following periods…

• Mar 15 to May 9 (this will be code 57)
• May 10 to Jul 4 (code 58)
• Jul 5 to Aug 29 (code 59), and
• Aug 30 to Sep 26 (code 60).

NOTE: this requirement exists for all T4 slips, even those where the employer did not claim any subsidy.

As you might expect, this additional reporting will be used by CRA for purposes of assessing compliance with respect to the relief programs.  In particular, this might mean ensuring an employee was not receiving the Canada Emergency Response Benefit (or similarly oriented student benefit) while also working.  It could also allow CRA to ensure that employers did not claim more than 75% of the maximum wages allowed, between the CEWS and TWS in aggregate.

The above requirements mean that significantly more detailed information may be required in order to prepare and file the 2020 T4 returns.  If our office is assisting with the preparation, it means it will be more important than ever that you provide all relevant information, as early as possible.  For the PD27, which can be submitted anytime, if you want us to prepare the form on your behalf then you will need to provide copies of all documents on which you computed your entitlement.  For the T4 slip requirement, meanwhile, we will require detailed information about gross pay to each employee, in the format illustrated below as Table 1.

Since we’re mentioning payroll compliance matters, here are three additional items which may be relevant for some employers.

The first arises due to the fact that many employers required (or allowed) their employees to work from home, in order to adapt to distancing requirements, government recommendations, etc.  This in turn will likely mean than many employees will be looking to deduct certain expenses, as permitted by the income tax rules, on their 2020 personal tax returns.  To permit those types of deductions, the employer must provide a signed T2200 form, specifying that the employment contract/terms required the employee to incur expenses or work away from the normal place of employment.  Where a T2200 is not available, or where expenses were less significant, the government recently announced that a simplified ($2/day) way to claim costs related to working from home will be available (subject to requirements and limits).

The second issue to bring to your attention is the first (approaching) deadline applicable to the CEWS program.  Claims for periods 1 through 5 must be submitted by January 31, 2021.

The final item is a caution for employers with employees working from home, if those homes are in a different province, and if those employees have the authority to enter into contracts.  For example, picture a Quebec resident who was asked by their Ontario employer to work from home.  If as part of that employee’s role she is able to independently do things such as open new accounts or approve orders, then this might effectively create a ‘permanent establishment’ in Quebec (which would mean additional reporting, and perhaps additional provincial tax, for the employer).

If you have questions about these matters, please contact us.

TABLE 1 – FORMAT OF DETAILED INFORMATION REQUIRED FOR T4 SLIP PREPARATION

For an Excel version of this table please click here: https://www.ck-ca.com/download.php?id=30