CRA finds that an unoccupied property was not a qualifying property for CEWS purposes

An eligible entity signed a pre-construction lease for new office space several years ago and then, after moving in, was unsuccessful in subleasing its previous space due to the COVID-19 pandemic. For Canada Emergency Rent Subsidy (“CERS”) purposes, was the unoccupied property a “qualifying property,” whose definition generally requires the real property to be used by the eligible entity in the course of its ordinary activities?

CRA noted that:

  • Ensite found that property was used in a business if it was employed and risked in the business such that the withdrawal of the property would have a decidedly destabilizing effect on the corporate operations.
  • Glaxo Wellcome found that the word “use” connotes actual utilization for some purpose, not holding for future use.

CRA concluded:

[G]iven that the office space was unoccupied since the eligible entity moved to a new office … the old office space would likely not be considered to be used in the ordinary activities of the eligible entity. This is because it does not appear to be employed and risked in the ordinary activities of the eligible entity, and is merely waiting to be subleased.

Neal Armstrong. Summary of 20 September 2021 Internal T.I. 2021-0883531I7 under s. 125.7(1) – qualifying property.