15 Dec Update on Immediate Expensing

Budget 2021, announced in April, proposed to allow the immediate expensing of certain property acquired by Canada Controlled Private Corporations (CCPCs). The eligible property would be acquired after April 18, 2021 up to January 1, 2024 to a maximum amount of $1.5 million per year (shared between associated companies). Eligible property would include property that is subject to the capital cost allowance (CCA) rules, other than Class 1 to 6, 14.1, 17, 47, 49, and 51 (generally long-lived assets).

Update

The Canada Revenue Agency (CRA) cannot implement system changes to process immediate expensing claims until a bill is tabled in the House of Commons. Any claims reported based on the budget announcement will not be processed.

A number of companies have already filed and claimed this additional deduction as the previously approved CRA software had allowed it. The CRA is adjusting these returns prior to processing to remove these additional deductions, and instead the CRA will allow the lower deduction under the current CCA rules. Those companies may be subject to higher taxes, and potentially interest and penalties for any late payment of taxes.

Based on our discussions with the government, the Department of Finance hopes to have the legislation tabled in the House of Commons in early 2022.  Any companies that have already filed their T2 returns and that are eligible for this benefit would then need to amend their tax returns to claim the full deduction. The CRA will then re-assess their tax returns.

If you have any questions, please get in touch with your contact at Clearline CPA.