3 Provisions from the 2011 Federal Budget that Benefit Small Businesses

Although the 2011 federal budget tabled in March was not directly responsible for an election, a change in government and one of the most interesting election results in recent history, it was certainly a contributing factor.  When the excitement was over however, the budget pretty much remained the same.  The budget’s primary focus is the economy and includes provisions to stimulate jobs and growth, while, for the most part, maintaining current tax rates.  Some provisions that impact small business are discussed below:

Temporary Hiring Credit

A one-time credit of up to $1,000 based on the increase in an employer's employment insurance (EI) premiums paid for 2011 over those paid for 2010. 

Small businesses whose EI premiums were less than $10,000 in 2010 and whose premiums increased in 2011 from 2010, are eligible for a one time credit.  The credit will be automatically calculated when you submit your T4s and summaries for 2011.  The deadline, to be eligible for the credit, is January 15, 2015 (if you haven’t filed your T4s by this time, you probably have bigger problems). 

Note that you cannot reduce your payroll deductions by the amounts anticipated.  You must wait for the CRA assessment subsequent to filing your T4 returns.

Further info can be found here

Manufacturing Sector Accelerated Capital Cost Allowance

In an effort to stimulate manufacturing businesses and encourage investment, the government has extended the accelerated capital cost allowance for machinery and equipment purchased by December 31, 2013.  Normally, businesses must include their machinery and equipment in class 43 which allows for depreciation at 30% (half year CCA i.e. 15% in the first year) on a declining balance basis.  The accelerated CCA provision lets business include their purchases of machinery and equipment in Class 29 which can be depreciated at 50% (25% in year one) on a straight line basis.  This can result in significant tax savings to businesses.

In order to claim the return you must attach a letter to your tax return indicating that you are electing to use Class 29 instead of Class 43.

Extension of Work Sharing Program

For employers whose business has experienced a lull and are considering layoffs, the work sharing program allows for a compromise.  Rather than laying off the worker, the employer can reduce their work week, while the employee is still entitled to EI benefits.

To qualify employers must have been in business for at least two years, demonstrate that the reduced work week is necessary, and show how the employee will be returned to a normal work week by the end of the agreement. 

Employees must be “core” staff, which can be either full time or part time as long as they are needed to carry out day to day functions of the business and be eligible for EI benefits.

At least two employees must participate in the work sharing agreement.

For new agreements beginning on or after April 3, 2011, the maximum initial Work-Sharing agreement duration is twenty-six weeks with a possible extension up to twelve weeks.

Existing agreements may also be extended up to an additional 16 weeks.

Additional details and how to apply for the work sharing program