Federal government COVID-19 tax updates

Highlights from the CRA’s recent webinar

The CRA recorded a webinar with us earlier this week. Here is a brief summary of some of the highlights. The CRA will review questions and provide available responses in early November. Watch this page for updates.

CEWS updates

The CRA provides a number of updates on CEWS during the webinar. Some outstanding issues the CRA addresses include:

  • what to expect on a CEWS audit
  • amending CEWS claims to revoke elections
  • referral of paragraph 125.7(4)(d) election concern for periods 5 to 9 to Finance Canada
  • use of retail months instead of calendar months
Tax treatment of the Canada Emergency Business Account (CEBA)

We have received a number of questions from members on whether the forgivable portion of the interest-free loan received pursuant to the CEBA program is included in income and, if so, when it should be included.

The CRA confirms the following:

  • The part of the loan that is forgivable is included in the income of the year in which the loan is received by virtue of paragraph 12(1)(x).
  • However, as CEBA funds are to be used to pay for non-deferrable operating expenses of the business including payroll, rent, utilities, insurance, property tax and regularly scheduled debt service, the recipient can elect to reduce the amount of outlay or expense under subsection 12(2.2) as opposed to reporting the amount as an income inclusion.
  • If the amount is repaid, a deduction can be claimed at the time of repayment.
Employer reimbursements of commuting costs and home office expenses

There are a number of questions relating to employee expenses many are looking for the CRA to provide guidance on. In the webinar, the CRA addresses the following employee-related issues:

  • Commuting Costs. Where an employee is reimbursed or receives a reasonable allowance from their employer for travel expenses associated with travelling from home to their regular place of employment during the pandemic, the CRA will not consider this to be a taxable benefit.
  • Parking Costs. Employer-provided parking at the employee’s regular place of employment will not be considered a taxable benefit by the CRA where the regular place of employment is closed during the COVID-19 pandemic.
  • Home Office Equipment. It appears that the CRA is expanding its previous position (2020-0845431C6 (F)) on employer reimbursements of personal computer equipment. In the webinar, the CRA states that employer reimbursements of up to $500 of home office equipment or computer equipment will not be a taxable benefit, provided the equipment is needed for the employee to perform his/her duties of employment at home. CRA indicates home office equipment would include items such as desks or chairs.
Subsection 164(6): Loss carrybacks by estates

Many have been asking whether the CRA will allow more time for the application of a subsection 164(6) for loss carrybacks by an estate, as there have been delays in the probate process, thereby delaying the ability to dispose of property with an accrued loss. The CRA indicates that they cannot extend the time limit for the estate to dispose of its properties beyond the first taxation year of the estate as provided in subsection 164(6). Subsection 164(6) does not allow the Minister of National Revenue any discretion to extend the application beyond the time limit, nor is subsection 164(6) specified in The Time Limits and Other Periods Act, which was enacted in Bill C-20.

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