CLIENT UPDATE April 6, 2020 Frequently asked questions relating to CERB

As registration for the Canadian Emergency Response Benefit (CERB) begins today for some individuals, we are providing this summary of frequently asked questions for your convenience to summarize some of our previous discussions and highlight recent developments in relation to this program.

What is the Canadian Emergency Response Benefit (CERB)?

Temporary income support being offered by the Federal government to support Canadian workers whose employment income has been impacted by the spread of COVID-19.  This program will provide a benefit of $500 per week for a maximum of 16 weeks of the 28 week period, from March 15 to October 2, 2020.

Who is eligible?

All of the following criteria must apply:

  • Canadian Resident
  • 15 years of age or older
  • Stopped working for reasons related to COVID-19
  • Employment, self-employment income or certain dividends (discussed later) of $5,000 or more in 2019, or the 12 months before the date of application
  • Without income (or expect to be without employment income) for at least 14 consecutive days within the initial four-week period, and no employment or self employment income in subsequent periods

What is considered a “reason relating to COVID-19”?

Some examples provided by the government include:

  • You have been let go from your job or your hours have been reduced to zero;
  • You are in quarantine or sick due to COVID-19;
  • You away from work to take care of others because they are in quarantine, sick due to COVID-19; and/or
  • You are away from work to take care of children or other dependents whose care facility is closed due to COVID-19.

CERB does not apply if you’ve quit your job voluntarily.

How soon will I start receiving my benefits?

The government of Canada indicated you will begin receiving benefits within 10 days of applying for them.

I’m an owner-manager of a corporation impacted by COVID-19.  Am I personally eligible for CERB?

Provided you meet all of the above criteria, you should be eligible for CERB.  Note that the government acknowledges that some owner-managers would have taken dividend compensation as opposed to salary compensation, and have indicated that non-eligible dividends received can be used to meet the $5,000 income requirement.

Should I apply for Employment Insurance (EI) or the CERB?

If you are no longer working for any reason related to COVID-19, you should apply for the CERB, even if you are eligible for EI. If your unemployment is unrelated to COVID-19, you should still apply for EI as usual. You cannot apply for both the CERB and EI at the same time.

What if I have already applied for EI?

If you have already applied for EI, you do not need to complete the CERB application. If you became eligible for EI from March 15th onwards, your application will automatically be processed under the CERB.  If you were eligible for EI prior to March 15th, your application will be processed as usual under the EI rules, regardless of the date that you apply. 

Is the CERB taxable?

Yes! All recipients must claim their benefit payments as income when preparing their 2020 income tax return.  Income tax is payable on the CERB, however it will not automatically be deducted when dispersed.  As a result, recipients should plan for the impact of that on their 2020 personal tax return filed in 2021. 

Do I need an ROE or to be laid off to apply for CERB?

You do not need to have been formally laid off in order to apply for CERB, and you will not be asked to submit an ROE at the time of application.  If you have been laid off by your employer, they should provide you with an ROE with the reason for dismissal indicated as “Shortage of Work”. 

I’m currently self-employed and am making a nominal amount of gross revenue from my business, which is fully offset by expenses.  Will this compromise my eligibility for CERB?

The legislation under the CERB Act refers to a worker “ceasing working” for reasons related to COVID-19 for at least 14 consecutive days and that they do not receive income from self-employment.  As a result, if you are still working, but earning insufficient revenue to offset your expenses, our understanding is that you would not be eligible as you have not “ceased” working (therefore you do not meet the first criteria). If you have ceased working but are continuing to earn some residual revenue (interest, royalties, etc.) that do not require you to be actively working, then you may still qualify.  Our assumption is that the reference to self-employment income above in the second part of the test is the net income as opposed to gross income.  That being said, further guidance on this specific scenario has not been provided from the government.

Applying for CERB

As discussed in our previous release, applications for CERB can start today for individuals with birthdays in January, February or March.  In order to apply for CERB, you will need a CRA “My Account”.  If your situation continues, you can re-apply for CERB for the next four-week period.

Full details on the application process can be found here.

We are happy to discuss any questions you may have about these matters.

This summary deals with proposed matters that are complex and may not apply to particular facts and circumstances. As well, the material and the references contained therein reflect laws and practices which are subject to change. For these reasons, this material should not be relied upon as a substitute for specialized professional advice in connection with any particular matter.

Although this communication has been carefully prepared, Wilkinson & Company LLP does not accept any legal responsibility for its contents or for any consequences arising from its use.  No part of this document may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means (photocopying, electronic, mechanical, recording or otherwise).