CRA wins in opposition to two extra taxpayers over pandemic advantages

Article content material

It’s been greater than 4 years because the authorities launched its first COVID-19 aid program within the type of the Canada Emergency Response Profit (CERB), in the end changed by the Canada Restoration Profit (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.

Article content material

As a reminder, the CERB was provided for any four-week interval between March 15, 2020, and Oct. 3, 2020, if an applicant may display they stopped working “for causes associated to COVID-19” and had revenue of no less than $5,000 from (self-)employment in 2019 or within the 12 months previous their first software.

The CERB was subsequently changed by the CRB, which turned accessible for any two-week interval between Sept. 27, 2020, and Oct. 23, 2021, for eligible workers and self-employed employees who suffered a lack of revenue because of the pandemic. The CRB’s eligibility standards have been just like these of the CERB.

A few profit instances that just lately discovered their method to court docket caught my eye. The primary, determined in Could, concerned a taxpayer who was in search of judicial evaluation of a Canada Income Company officer’s choices that the taxpayer was ineligible for a number of advantages, together with the CRB, Canada Restoration Illness Profit and Canada Employee Lockdown Profit.

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 revenue requirement (amongst different circumstances). In November 2022, he requested a second evaluation of the CRA’s choices. The CRA had a number of calls with the taxpayer and/or his spouse, earlier than reconfirming, in August 2023, its preliminary resolution to disallow the advantages.

Article content material

Article content material

The taxpayer then sought a judicial evaluation 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 resolution to disclaim him the advantages was “cheap” and “appropriately justified, clear and intelligible.”

The choose famous that to be eligible for COVID-19 advantages, a taxpayer should have had a complete revenue of no less than $5,000, and the laws expressly states that revenue from self-employment is “internet revenue,” which is outlined as “income from the self-employment much less bills incurred to earn that income.”

The choose went on to elucidate that when the advantages have been first launched, “to allow Canadians to entry these advantages as rapidly as attainable,” 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 revenue of $12,780 in 2019, however had bills that 12 months totalling $25,120.

Article content material

In consequence, the CRA decided the taxpayer’s internet self-employment revenue was truly a lack of $12,340 (gross revenue much less bills incurred to earn the income). As well as, he had reported damaging internet self-employment revenue in his 2019, 2020 and 2021 tax returns.

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

The choose 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) duty 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 durations from late September 2020 to the top of October 2021.

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

Article content material

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

The taxpayer stated the CRA “unreasonably” decided that his reported 2019 “revenue” constituted a mortgage, somewhat than advance funds meant to characterize 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-about revenue, however the truth that it needed to be paid again as a result of the tour didn’t in the end undergo.

The choose determined the quantities acquired have been merely not revenue.

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

The choose additionally stated that no matter whether or not the cost was a mortgage, an advance cost or revenue, the basic difficulty on this case was that the taxpayer offered no proof, apart from his financial institution statements, to substantiate the cost was, in truth, work-related. The e-transfers he offered have been unsupported by any invoices, receipts or documentation.

Article content material

In consequence, the choose decided that the CRA officer correctly thought-about all of the taxpayer’s proof and explanations. Primarily based on that evaluation, it was “cheap” for the officer to conclude the proof didn’t sufficiently present that the taxpayer had met the $5,000 revenue requirement. The taxpayer’s software for judicial evaluation was subsequently dismissed.