Three cases where COVID-19 benefits were denied to taxpayers

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It’s been practically 5 years since COVID-19 benefits have been launched, but practically each week the federal court docket continues to listen to circumstances introduced by people who obtained advantages that, upon subsequent scrutiny by the Canada Revenue Agency, they weren’t certified to obtain. Right here’s a trio of current such circumstances determined over the previous month that provides us a window into the forms 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 making an attempt to hold on to her Canada Restoration Profit (CRB). As a reminder, the CRB changed the Canada Emergency Response Benefit (CERB), each of which have been obtainable to eligible workers and self-employed staff who suffered a lack of revenue because of the pandemic. The CRB’s eligibility standards have been just like the CERB in that they required, amongst different issues, that the person had earned not less than $5,000 in (self-)employment revenue in 2019, 2020 or throughout the 12 months previous the date of their utility, and that they ceased working as a consequence of COVID-19.

The self-employed day dealer stopped working in April 2019 to take care of her members of the family. She utilized for a profit underneath the CRB program, however her eligibility was questioned by the CRA.

The taxpayer defined that she ceased day buying and selling because of the 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 finally 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 choice to disclaim her the advantages was “affordable.” The CRA famous that the taxpayer did undergo 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 affordable 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 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 fastened 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 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 revenue throughout the related intervals, primarily based on the revenue he had reported for the 2019 and 2020 calendar years.

The taxpayer went to court docket in search of a judicial assessment of the CRA’s choice 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 revenue 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 your entire interval he claimed them.”

As in all such advantages circumstances, the federal court docket decide’s function is to find out whether or not the CRA officer’s choice was affordable. Whereas the taxpayer argued that the factors needs to be totally different to replicate the truth of small enterprise startups, and to consider intervals when revenue was misplaced as a consequence of 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 an alternative, Parliament adopted the principles 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 due to this fact decided that the CRA’s choice to disclaim the opposite 12 intervals of advantages was affordable.

The injured employee

The third case concerned a taxpayer who misplaced his job in 2017 as a consequence of a office accident, and was supposed to start out working once more starting in November 2019. He started in search of employment that month, however was not employed when the pandemic started in March 2020. Consequently, the one revenue the taxpayer obtained in 2019 and 2020 got here from T5007 slips issued by the Government of Quebec for staff’ 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 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 due to this fact needs to be eligible for advantages.

The decide disagreed, noting that there was no assist for this place, and thus the CRA officer’s choice to disclaim the taxpayer COVID advantages was affordable since he didn’t meet the legislative necessities, particularly that he stopped working for causes associated to COVID, and that he had not less than $5,000 of (self-)employment revenue.

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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