Two recently published technical interpretations, 2020-0873601I7 and 2021-0880401I7, deal with whether various mandated closures would qualify for lockdown support. The scenarios presented to the CRA were:
- a travel agency, which was required to close its office due to lockdown measures in effect in the city where it is located, but employees were able to perform their duties from home
- a retail store located in a shopping mall where a public health order mandates the closure of the store for in-person shopping but may provide sales online or by phone via curbside pick-up or delivery
- a food court restaurant in a shopping mall where a public health order requires the closure of the food court seating area
In its responses, the CRA provides a useful analysis of the various conditions of “public health restriction” under subsection 125.7(1). Of particular note, the CRA indicates that in determining whether a public health restriction requires that some or all of the activities of the eligible entity at the qualifying property are required to cease (i.e., “restricted activities”), the CRA provides that this determination is based on the type of activity rather than the extent to which an activity may be performed, or limits placed on the time during which an activity may be performed.
The CRA also notes that for a particular order to meet the conditions of a public health restriction under subsection 125.7(1), it requires that it is reasonable to conclude that at least approximately 25 per cent of the qualifying revenues of the eligible entity for the prior reference period that were earned from the qualifying property were derived from the restricted activities. The CRA indicates that the entity may have some flexibility in the method it can use to satisfy this condition, provided that it is appropriate for those particular circumstances.
Thus, in the case of a travel agency, if, prior to the closure, clients made in-person visits to the office to arrange travel bookings and in-person visits ceased upon closure of the office as the result of an order or decision, then those activities could be considered restricted activities and this condition could be satisfied. The fact that employees started working from home and started making travel bookings over the phone once the office closed would not preclude this condition from being met. The CRA applies this same rationale for the closed store in the shopping mall but still providing curbside pickup or delivery for its customers (i.e., the in-person shopping could be considered the restricted activity).
For the food court restaurant, where the public seating areas for customers of the restaurant are required to be closed, the CRA indicates that the “sit-down dining” activities could be considered restricted activities, and the fact that take-out service may continue would not preclude the restaurants from having restricted activities related to “sit-down dining”. It is not clear to us how the 25 per cent of revenues condition noted above would be documented in this situation.
Finally, the CRA re-confirms that for the condition that the restricted activities are required to cease for a period of at least one week, there is no requirement this must be within a particular qualifying period.