Three circumstances the place COVID-19 advantages had been denied to taxpayers

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It’s been almost 5 years since COVID-19 advantages had been launched, but almost each week the federal courtroom continues to listen to circumstances introduced by people who acquired advantages that, upon subsequent scrutiny by the Canada Income Company, they weren’t certified to obtain. Right here’s a trio of latest such circumstances determined over the previous month that offers us a window into the varieties of claims taxpayers made, and why they’re being denied.

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The day dealer

The primary case concerned a day dealer, who was in federal courtroom lately making an attempt to hold on to her Canada Restoration Profit (CRB). As a reminder, the CRB changed the Canada Emergency Response Profit (CERB), each of which had been accessible to eligible staff and self-employed staff who suffered a lack of revenue as a result of pandemic. The CRB’s eligibility standards had been much like the CERB in that they required, amongst different issues, that the person had earned at the very least $5,000 in (self-)employment revenue in 2019, 2020 or in the course of the 12 months previous the date of their utility, and that they ceased working as a result of COVID-19.

The self-employed day dealer stopped working in April 2019 to look after her relations. She utilized for a profit beneath the CRB program, however her eligibility was questioned by the CRA.

The taxpayer defined that she ceased day buying and selling as a result of illness of her mom, her sister, and her canine. The taxpayer needed to journey to a different metropolis to take care of her mom. In April 2019 she needed to euthanize her canine. Each her mom and sister ultimately died. The taxpayer additional famous that she contracted COVID-19 in March 2020, January 2021, and October 2022.

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The choose was sympathetic, acknowledging the taxpayer’s tragic private circumstances, however nonetheless discovered the CRA’s determination to disclaim her the advantages was “cheap.” The CRA famous that the taxpayer did endure a discount in revenue when she stopped day buying and selling, however this was in April 2019, which was 11 months previous to the beginning of the pandemic. Thus it was cheap for the CRA to conclude that the explanation the taxpayer stopped working was unrelated to COVID-19.

The health membership proprietor

The second case concerned a taxpayer who opened a health facility in August 2019. With a view to get his enterprise off the bottom, he didn’t pay himself a wage till 2020. However, due to government-imposed restrictions in the course of the pandemic, the taxpayer was compelled to shut his facility for sure intervals. He says that the enterprise was closed for 13 months throughout a 24-month interval. Regardless of being closed, nonetheless, the enterprise continued to incur mounted prices, together with hire and utilities. Whereas the taxpayer tried to seek out different employment throughout this era, he was unable to take action as a result of different service-related industries had been additionally experiencing slowdowns and closures.

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The taxpayer utilized for the CRB for 27 two-week profit intervals however the CRA subsequently suggested him that he was solely eligible for 15 of those intervals as a result of he had not skilled a 50 per cent discount in his common weekly revenue in the course of the related intervals, primarily based on the revenue he had reported for the 2019 and 2020 calendar years.

The taxpayer went to courtroom searching for a judicial evaluate of the CRA’s determination to disclaim him advantages. He argued that he was compelled to close down his enterprise due to government-imposed lockdowns, and that it was unreasonable for the CRA to not take this under consideration in calculating his drop in revenue over the prior 12 months. As he defined, “If the months he was compelled to shut weren’t included, he can be eligible for the CRB advantages for the whole interval he claimed them.”

As in all such advantages circumstances, the federal courtroom choose’s function is to find out whether or not the CRA officer’s determination was cheap. Whereas the taxpayer argued that the standards ought to be totally different to replicate the truth of small enterprise startups, and to bear in mind intervals when revenue was misplaced as a result of pandemic lockdowns, the choose defined that each of those points might have been taken under consideration by Parliament and mirrored within the CRB Act, both by adopting totally different guidelines or giving CRA officers extra discretion. As an alternative, Parliament adopted the principles as set out within the laws and gave CRA officers nearly no discretion in making use of them. In different phrases, the CRA officer had no alternative however to use the standards set out within the legislation, which the taxpayer merely didn’t meet.

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The choose subsequently decided that the CRA’s determination to disclaim the opposite 12 intervals of advantages was cheap.

The injured employee

The third case concerned a taxpayer who misplaced his job in 2017 as a result of a office accident, and was supposed to begin working once more starting in November 2019. He started searching for employment that month, however was not employed when the pandemic started in March 2020. Consequently, the one revenue the taxpayer acquired in 2019 and 2020 got here from T5007 slips issued by the Authorities of Quebec for staff’ compensation advantages, specifically $18,366 in 2019, and $9,577 in 2020.

The taxpayer utilized for the CERB, which was later challenged by the CRA as a result of he didn’t meet the correct standards. Whereas the taxpayer acknowledged that he didn’t “cease working” since he was not working when the pandemic started, he argued that the CRA officer ought to have nonetheless thought-about that he was in search of work, and subsequently ought to be eligible for advantages.

The choose disagreed, noting that there was no assist for this place, and thus the CRA officer’s determination to disclaim the taxpayer COVID advantages was cheap since he didn’t meet the legislative necessities, specifically that he stopped working for causes associated to COVID, and that he had at the very least $5,000 of (self-)employment revenue.

Jamie Golombek, FCPA, FCA, CFP, CLU, TEP, is the managing director, Tax & Property Planning with CIBC Non-public Wealth in Toronto. Jamie.Golombek@cibc.com.

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