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

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It’s been practically 5 years since COVID-19 advantages have been launched, but practically each week the federal court docket 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 sorts 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 court docket lately attempting to hold on to her Canada Restoration Profit (CRB). As a reminder, the CRB changed the Canada Emergency Response Profit (CERB), each of which have been obtainable to eligible workers and self-employed employees who suffered a lack of earnings as a result of pandemic. The CRB’s eligibility standards have 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 earnings in 2019, 2020 or throughout the 12 months previous the date of their software, and that they ceased working resulting from COVID-19.

The self-employed day dealer stopped working in April 2019 to take care of her relations. She utilized for a profit below 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 decide was sympathetic, acknowledging the taxpayer’s tragic private circumstances, however nonetheless discovered the CRA’s resolution to disclaim her the advantages was “cheap.” The CRA famous that the taxpayer did endure a discount in earnings 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 rationale 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 the intention to get his enterprise off the bottom, he didn’t pay himself a wage till 2020. However, due to government-imposed restrictions throughout the pandemic, the taxpayer was pressured 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, nevertheless, the enterprise continued to incur mounted prices, together with lease 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 have 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 earnings throughout the related intervals, primarily based on the earnings he had reported for the 2019 and 2020 calendar years.

The taxpayer went to court docket looking for a judicial overview of the CRA’s resolution to disclaim him advantages. He argued that he was pressured to close down his enterprise due to government-imposed lockdowns, and that it was unreasonable for the CRA to not take this into consideration in calculating his drop in earnings over the prior 12 months. As he defined, “If the months he was pressured to shut weren’t included, he can be eligible for the CRB advantages for all the interval he claimed them.”

As in all such advantages circumstances, the federal court docket decide’s position is to find out whether or not the CRA officer’s resolution was cheap. Whereas the taxpayer argued that the factors needs to be totally different to mirror the fact of small enterprise startups, and to take into consideration intervals when earnings was misplaced resulting from pandemic lockdowns, the decide defined that each of those points might have been taken into consideration by Parliament and mirrored within the CRB Act, both by adopting totally different guidelines or giving CRA officers extra discretion. As a substitute, Parliament adopted the foundations as set out within the laws and gave CRA officers just about no discretion in making use of them. In different phrases, the CRA officer had no alternative however to use the factors set out within the regulation, which the taxpayer merely didn’t meet.

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The decide subsequently decided that the CRA’s resolution 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 resulting from a office accident, and was supposed to start out working once more starting in November 2019. He started looking for employment that month, however was not employed when the pandemic started in March 2020. In consequence, the one earnings the taxpayer acquired in 2019 and 2020 got here from T5007 slips issued by the Authorities of Quebec for employees’ compensation advantages, particularly $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 right 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 of that he was searching for work, and subsequently needs to be eligible for advantages.

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

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

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