CRA wins against two more taxpayers over pandemic benefits

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It’s been greater than 4 years for the reason that authorities launched its first COVID-19 relief program within the type of the Canada Emergency Response Benefit (CERB), in the end changed by the Canada Recovery Benefit (CRB). However the courts proceed to listen to instances introduced by people who’ve been requested to repay advantages they need to have by no means acquired as a result of they merely didn’t qualify.

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As a reminder, the CERB was supplied for any four-week interval between March 15, 2020, and Oct. 3, 2020, if an applicant may reveal they stopped working “for causes associated to COVID-19” and had earnings of at the least $5,000 from (self-)employment in 2019 or within the 12 months previous their first utility.

The CERB was subsequently changed by the CRB, which grew to become out there for any two-week interval between Sept. 27, 2020, and Oct. 23, 2021, for eligible staff and self-employed staff who suffered a lack of earnings because of the pandemic. The CRB’s eligibility standards had been much like these of the CERB.

A few profit instances that lately discovered their technique to court docket caught my eye. The primary, determined in Might, concerned a taxpayer who was in search of judicial overview of a Canada Revenue Agency officer’s choices that the taxpayer was ineligible for a number of advantages, together with the CRB, Canada Recovery Sickness Benefit and Canada Worker Lockdown Benefit.

In March 2022, the CRA knowledgeable the taxpayer he was ineligible for all three advantages as a result of he didn’t meet the $5,000 minimal earnings requirement (amongst different situations). In November 2022, he requested a second overview of the CRA’s decisions. The CRA had a number of calls with the taxpayer and/or his spouse, earlier than reconfirming, in August 2023, its preliminary choice to disallow the advantages.

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The taxpayer then sought a judicial overview of the CRA officer’s choices in Federal Court docket. As in all COVID-19-benefit-eligibility instances, the court docket was tasked with figuring out whether or not the CRA’s choice to disclaim him the advantages was “cheap” and “appropriately justified, clear and intelligible.”

The decide famous that to be eligible for COVID-19 advantages, a taxpayer should have had a complete earnings of at the least $5,000, and the laws expressly states that earnings from self-employment is “web earnings,” which is outlined as “income from the self-employment much less bills incurred to earn that income.”

The decide went on to elucidate that when the advantages had been first launched, “to allow Canadians to entry these advantages as shortly as doable,” taxpayers “merely attested that they met the eligibility necessities.” The CRA was then tasked with substantiating all advantages issued and validating such funds the place eligibility was in query.

On this case, and based mostly on the taxpayer’s documentation offered to the CRA, the company decided the taxpayer had earned gross self-employment income of $12,780 in 2019, however had bills that 12 months totalling $25,120.

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Because of this, the CRA decided the taxpayer’s web self-employment earnings was really a lack of $12,340 (gross earnings much less bills incurred to earn the income). As well as, he had reported destructive web self-employment earnings in his 2019, 2020 and 2021 tax returns.

The taxpayer’s major argument was that he disagreed that eligibility for the advantages was based mostly on web earnings versus gross earnings. In the end, nonetheless, the CRA officer didn’t have any discretion to depart from making use of the suitable eligibility standards, which was a $5,000 web earnings check.

The decide dismissed the taxpayer’s case, concluding: “Whereas I’m sympathetic to the (taxpayer’s) circumstances, this court docket has held that it’s (the taxpayer’s) accountability to make sure that they meet the eligibility standards.”

The second case, determined in April, concerned a taxpayer who utilized for and acquired CRB funds for 26 two-week intervals from late September 2020 to the top of October 2021.

The taxpayer mentioned he labored half time in 2019 to rearrange a theatre and competition tour, which was shut down because of COVID-19. As a part of his work association, he mentioned he had acquired developments of greater than $5,000 to his private checking account from a patron. He offered 4 financial institution statements, however mentioned he didn’t have any invoices.

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The taxpayer mentioned he was speculated to pay again the advance funds from the tour income and that this was a casual, oral association that was not reported in his 2019 tax return. He additionally confirmed he had no different earnings in 2020 or 2021 and conceded on the listening to that he had no different paperwork he may have offered to show his earnings in 2019.

The taxpayer mentioned the CRA “unreasonably” decided that his reported 2019 “earnings” constituted a mortgage, quite than advance funds meant to signify the time he spent engaged on the tour. He argued that an advance and mortgage are two various things and that an advance needs to be thought of earnings, however the truth that it needed to be paid again as a result of the tour didn’t in the end undergo.

The decide determined the quantities acquired had been merely not earnings.

“By any definition, a cost that must be returned as a result of the work has not been achieved can’t be thought of as earnings,” she mentioned.

The decide additionally mentioned that no matter whether or not the cost was a mortgage, an advance cost or earnings, the basic problem on this case was that the taxpayer offered no proof, moreover his financial institution statements, to verify the cost was, the truth is, work-related. The e-transfers he offered had been unsupported by any invoices, receipts or documentation.

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Because of this, the decide decided that the CRA officer correctly thought of all of the taxpayer’s proof and explanations. Based mostly on that overview, it was “cheap” for the officer to conclude the proof didn’t sufficiently present that the taxpayer had met the $5,000 earnings requirement. The taxpayer’s utility for judicial overview was subsequently dismissed.