Principal Issues: Is a voluntary repayment of the CEWS deductible in computing a taxpayer's profit from a business or property under subsection 9(1)? If so, in which taxation year would the deduction be permitted? If the CEWS was included in income under paragraph 12(1)(x) of the Act, would the voluntary repayment be deductible pursuant to paragraph 20(1)(hh) of the Act?
Position: Where the CEWS was originally included in computing a taxpayer’s profit from a business or property under subsection 9(1) of the Act, if the eligible entity were to complete the necessary steps to cancel the relevant CEWS application(s), a deduction would be permitted in computing a taxpayer's profit from a business or property under subsection 9(1) of the Act, and would not be prohibited by the general limitation in 18(1)(a) of the Act, in the year there is a legal obligation to repay an amount. A deduction would also be permitted under paragraph 20(1)(hh) if an amount is repaid by a taxpayer in the year, pursuant to a legal obligation to repay all or part of a particular amount that was included under paragraph 12(1)(x) of the Act in computing income for the year or a preceding taxation year. A legal obligation, for purposes of subsection 9(1) and paragraph 20(1)(hh), would generally arise at the time the eligible entity completes the necessary steps to cancel the relevant CEWS application(s).
Reasons: See below.
