COVID-19 Tax Update: B.C. announces Small and Medium-Sized Business Recovery Grant program

On October 9, 2020, the B.C. government announced a new Small and Medium-Sized Business Recovery Grant program. The program will provide up to $300 million to B.C. businesses that experienced a 70% revenue loss during March and April 2020, and continue to earn less than 50% of their pre-COVID revenue. Eligible B.C. businesses will receive a one-time, non-recoupable grant of between $10,000 and $30,000, depending on their pre-COVID revenue.

Several additional criteria apply to access the grant, including that the business:

  • is majority owned by B.C. residents and headquartered in B.C.;
  • has operated in B.C. for at least three years;
  • pays taxes in B.C.;
  • employs between two and 149 B.C. residents;
  • reported positive cash flow for its last financial statement;
  • maintains a payroll account number with CRA (or engages a payroll service provider to make payroll remittances on its behalf);
  • received or applied for federal COVID-19 relief; and
  • is currently operating and has not been prepared for closure or dissolution.

An additional grant of $5,000 to $10,000 will be available to eligible tourism-related businesses which meet certain additional criteria, including being able to demonstrate that at least 75% of their demand and revenue comes from visitors to B.C. who are travelling for the purpose of leisure.

Any grant application must include recent payroll documents, financial statements, tax returns, and recent revenue calculations. Applicants must also disclose all sources of provincial or federal COVID-19 funding received since March 10, 2020.

Once a grant application is submitted, the eligible business will be matched with a government-selected professional services provider (PSP), and together they will develop a “recovery plan” outlining long-term steps designed to make the business solvent again.  This recovery plan will then be reviewed by the B.C. government “to ensure it provides a realistic and implementable path to stabilizing [the] business.” If the plan is approved, grant funding will then be provided. All grant recipients will be required to update the B.C. government on recovery efforts and participate in a third-party audit at the end of the program.

Eligible businesses may apply for grants immediately. Grants are available until March 31, 2021 or until the reserved funds (up to $300 million in aggregate) are fully distributed.  Given the limited capital pool available for disbursement, eligible businesses may wish to consider applying as soon as reasonably possible.

Any grant received would likely be taxable income to the recipient, and “government assistance” for the purposes of the Scientific Research and Experimental Development (SR&ED) Program, under the federal Income Tax Act.