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Wage Subsidies

Looking for opinions. When do you think these wage subsidies should be recognized as income? When they are applied for or to the pay period that they apply to? I think maybe the treatment of the 10% subsidy might be different that the 75% one.

Also, we have many farm clients, when calculating the revenue drops is it strictly a month over month comparison? Just timing of sales could potentially make one qualify or not (they say cash basis is ok) even though year over year their revenues could be up.


If using cash basis (as farms do) the subsidy is recognized when received.
HOWEVER, they are not included in revenue calculations for the following periods of the subsidy claims.

Revenue tests are to be consistent. The method you used to qualify in the first successful claim is to be used throughout the program. If year over year the revenue is up, so sorry, only the 10% subsidy can be claimed.

Thanks Debbie but

The first question is referring to accrual basis. ie should it be the date you apply for the subsidy or the pay period(s) it applies to.

Second question that’s not what I’m talking about. Perhaps an example:

In 2019 Old MacDonald sells all his calves except two that are underweight on March 1st for $497,000 then fattens the two remaining selling one April 15 for $1,500 and the other May 1st for $1,500. Total 2019 revenue $500,000 and there are no other sales in 2019.

In 2020 all the calves are ready to sell and MacDonald sells all the calves February 28th for $500,000. Total 2020 sales $500,000 and there will be not further revenue.

So is Old MacDonald eligible for the CEWS?


Re: your first question, I have been recording them both as revenue when received (per typical revenue recognition rules, as long as the business was eligible and made the claim legitimately). However, the CEBA loan is different - it is a liability until Dec 31, 2022, at which point 25% becomes taxable income and the rest has to be repaid.

Re: your second question, if they tick off the second-last box on the attestation form, they can use the average revenue from Jan-Feb 2020 as a fixed “prior reference period” for each submission (instead of the corresponding 4 weeks from the prior year). So, per your example, the revenue for the “prior reference period” would be $250,000 ($500,000 ÷ 2 months). If they used the “normal” reference period, they would qualify for only 1 of the 3 periods (i.e. April 12 - May 9).

Pretty sure the example shows a 100% decline in revenue for all periods. But the mechanics of it is not the issue. In this example the taxpayer has suffered no decline in revenue overall, should he be eligible? Will this come back to bite us if we apply for CEWS?

Also if you think this is going to fly and with the CEWS extended, should we advise our farm clients to defer all their revenue to October?


That’s not something any of us can answer. In situations like this, I usually review the wording of the tax act and decide whether I can make it work for the client’s situation. Then document my reasoning and details of how the act applies to the situation - in case I have to provide it to CRA at some point. If that is something you’re not comfortable with, a tax lawyer would be the best person to ask.

CRA is now saying that the income inclusion is in the period the wage subsidy was filed for and not the date received.