COVID-19: Key changes to federal pandemic subsidies
Introduction
As COVID-19 continues to impact Canadians, a number of key changes to federal pandemic subsidies have been legislated. As stated in our previous subsidy article series (CEWS, CERS), the Canadian government has created and updated existing assistance programs to better adapt to the changing pandemic landscape.
The new legislation, receiving Royal Assent on December 17, 2021, introduces new subsidy programs specifically targeting industries, sectors, businesses, and individuals hardest hit by the pandemic.
The key subsidies introduced are the Tourism and Hospitality Recovery Program and the Hardest Hit Business Recovery Program. These subsidies are designed to replace the CEWS and CERS programs for periods after October 23, 2021 and subsidize eligible rent and wages. Refer to our previous subsidy articles for an overview of what qualifies as eligible wage or rent expenses, as these have remained unchanged. These new subsidies currently provide support to eligible businesses up to May 7, 2022.
Subsidies
Tourism and Hospitality Recovery Program (THRP)
The Tourism and Hospitality Recovery Program (THRP) is available to subsidize eligible wages, rent expenses, or both.
There are two pathways of eligibility:
| Eligibility path one | Eligibility path two |
|---|---|
The organization:
| The organization:
|
*The methodology for choosing a prior reference period for CEWS/CERS is carried forward under THRP/HHBRP. For example, if you previously made an election for the average of January and February to be your prior reference period under CEWS/CERS, then you must continue to use this as your prior reference period under THRP/HHBRP.
To determine if an organization’s activities are eligible, the CRA has provided a comprehensive list of qualifying activities here.
The government has already announced proposed changes to the THRP in response to the changing pandemic to expand eligibility for claim periods 24 and 25 (December 19, 2021 to February 12, 2022). Proposals have been made to expand Eligibility pathway two to include entities that were subject to capacity-limiting restrictions of 50% or more (previously the activity must have been stopped completely) and reduce the current-month revenue decline threshold to 25% for those entities (previously 40%).
Once eligibility is determined, the subsidy rate is then calculated as a function of the entity’s revenue drop in the period, which is then applied to organization’s eligible remuneration and/or eligible rent expenses. The subsidy rates differ from period to period, as legislated.
| Tourism and Hospitality Recovery Program – subsidy rates | ||||
|---|---|---|---|---|
| Claim period | Claim period revenue drop | Claim period revenue drop | ||
| 22-26 October 24, 2021 – March 12, 2022 | 75% and over | 75% | ||
40%-74.99% | Identical to revenue drop | |||
Less than 40% | 0% | |||
| 27-28 March 13 - May 7, 2022 | 75% and over | 37.5% | ||
40%-74.99% | 0.5 x Revenue drop | |||
Less than 40% | 0% | |||
Additionally, if a location within your organization was affected by a public health restriction, you may be eligible for an additional 25% subsidy on eligible rent expenses, similar to the CERS top-up subsidy.
Hardest-Hit Business Recovery Program (HHBRP)
The Hardest-Hit Business Recovery program (HHBRP) can similarly help cover wage and/or rent expenses for eligible businesses. The subsidy is designed to target hardest-hit businesses that may not have otherwise qualified under the THRP.
To be eligible, the organization must have:
- experienced a revenue drop of 50% in the period they are applying for when compared to the prior reference period.
- experienced a 12-month average revenue drop of at least 50% from March 2020 to February 2021 compared to the prior reference period
Once eligibility is determined, the subsidy rate is then calculated as a function of the entity’s revenue drop in the period, which is then applied to organization’s eligible remuneration and/or eligible rent expenses. The subsidy rates available may differ from period to period, as legislated.
| Hardest Hit Business Recovery Program– subsidy rates | ||||
|---|---|---|---|---|
| Claim period | Claim period revenue drop | Subsidy rate | ||
| 22-26 October 24, 2021 – March 12, 2022 | 75% and over | 50% | ||
50%-74.99% | 10% + (Revenue drop – 50%) x 1.6 | |||
Less than 50% | 0% | |||
| 27-28 March 13 - May 7, 2022 | 75% and over | 25% | ||
50%-74.99% | 5% + (Revenue Drop – 50%) x 0.8 | |||
Less than 50% | 0% | |||
Canada Recovery Hiring Program (CRHP) – extension
The Canada Recovery Hiring Program (CRHP) was introduced for period 17 (June 6, 2021) and was created to encourage hiring and increasing existing employees’ wages or hours. The subsidy is designed to assist businesses rebuild and regrow their workforce after the lengthy Winter 2021 COVID-19 lockdowns and restrictions. The program was originally intended to end in period 22 (November 20, 2021), but new legislation extended the subsidy to May 7, 2022.
To be considered eligible, the organization must be a Canadian-controlled private corporation (CCPC), an individual sole proprietorship, a non-profit organization, a specified partnership, or a registered charity. They must have also experienced a revenue decline of more than 0% for period 17 (June 6 – July 30), and a revenue drop of greater than 10% for all periods between July 4 and May 7, 2022, when compared to the prior reference period.
The CRHP subsidy is based on the incremental remuneration, which is the increase in amounts paid to eligible employees for the claim period when compared to the March 14, 2021 – April 10, 2021 base period. This incremental remuneration is then multiplied by a flat 50% rate for periods 17-19 and gradually decreases to 30% in period 21. The new legislation increased the CRHP subsidy rate to 50% rate for period 22 onwards, to further encourage economic growth and rehiring, as organizations rebuild from the difficulties brought on by the pandemic.
Application periods
The chart below details the claim period windows and filing deadlines for the THRP, HHBRP, and CRHP subsidies. For relevant periods, when applying for wage subsidies, an organization can claim the higher of the previously existing CRHP subsidy or the wage portion of the THRP/HHBRP.
| Period | Dates | Deadline |
|---|---|---|
| 22 | October 24, 2021 – November 20, 2021 | May 19, 2022 |
| 23 | November 21, 2021 – December 18, 2021 | June 16, 2022 |
| 24 | December 19, 2021 – January 15, 2022 | July 14, 2022 |
| 25 | January 16, 2022 – February 12, 2022 | August 11, 2022 |
| 26 | February 13, 2022 – March 12, 2022 | Sept. 8, 2022 |
| 27 | March 13, 2022 – April 9, 2022 | Oct. 6, 2022 |
| 28 | April 10, 2022 – May 7, 2022 | Nov. 3, 2022 |
Subsidy application
To determine the amounts an organization may be able to claim for either subsidy, the Canadian government has released detailed subsidy calculators, similar to past subsidy programs. As mentioned, applications are divided into organizations wishing to receive support for wage or rent expenses.
By accessing the online calculator, found here, the organization can determine the level of wage and hiring support to which they may be entitled.
Similarly, to calculate rent and property support amounts for the organization, access this calculator, found here.
How Fuller Landau can help
Fuller Landau’s Tax team understands the challenges and uncertainty brought on as a result of the pandemic. We are happy to help your business assess how the various COVID-19 relief programs may benefit your organization and discuss next steps to determine eligibility and preparing the claims.
If you think your business may be eligible for these subsidies or have any tax-related COVID-19 inquiries, the Tax group at Fuller Landau is ready to answer your questions.
About the authors
Ben Schwarz is a Senior Tax Specialist in our Tax group. He can be reached at 647-417-0353 or bschwarz@fullerllp.com.
Matthew Maxin is a Junior Tax Specialist in our Tax group. He can be reached at 647-417-0415 or mmaxin@fullerllp.com.