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The Canada Revenue Agency headquarters stands in Ottawa on Aug. 17, 2020.

Sean Kilpatrick/The Canadian Press

The federal government has decided it will not force self-employed Canadians to pay back thousands of dollars in emergency benefits if they were among those who became ineligible because of confusion over the program’s rules.

The decision clears up months of uncertainty over Ottawa’s position as an unknown number of Canadians faced the possibility of returning large sums that have already been spent.

The Canada Emergency Response Benefit was the largest support program for workers who suddenly lost almost all their income because of the pandemic and was open to Canadians who had earned at least $5,000 in the previous 12 months or in the 2019 calendar year.

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The CERB paid $2,000 a month over seven months, for a total maximum benefit of $14,000.

Prime Minister Justin Trudeau says thousands of Canadians are getting reprieves from repaying federal emergency benefits. Prime Minister Justin Trudeau says those who applied for the Canada Emergency Response Benefit based on their gross incomes, not their net, won't have to cut the government a cheque. The Canadian Press

In recent months, some self-employed Canadians said they were being told to repay their CERB money because they did not meet the $5,000 income threshold. The issue was that some had understood the threshold to mean gross income – before taxes or other deductions – but if the government used net income, they would fall below the threshold. Late last year, the Canada Revenue Agency sent letters to more than 440,000 CERB recipients to notify them that their eligibility couldn’t be confirmed and that they may have to repay their benefits.

The agency has previously acknowledged that some explanations on its website and through CRA call centres related to the definition of income “were unclear in the first days after the CERB was launched,” adding, “We regret that this lack of consistent clarity led some self-employed individuals to mistakenly apply to the CERB despite being ineligible.”

COVID-19 news: Updates and essential resources about the pandemic

Employment Minister Carla Qualtrough said Tuesday that after a close review of the situation, the government decided that claimants who made honest mistakes in the program’s initial period and who met the conditions using gross income should be allowed to keep the benefit. Any individuals who have already repaid the amounts will be reimbursed. She acknowledged the government’s decision may upset individuals who could have applied for the program in those early days, but chose not to because they relied on net income rather than gross income.

“What I would say to people who didn’t apply for the CERB is I appreciate the frustration you may feel with this, but we are dealing here with a subset of the nine million Canadians who applied for CERB who legitimately and honestly relied on misinformation we provided. And that’s the problem we’re solving here today,” she said at a news conference.

The government also announced that it would be providing one year without interest on certain 2020 tax debt, which would give people more flexibility to repay amounts. This will be available to individuals who received federal emergency benefits such as the CERB and earned as much as $75,000 in taxable income.

Dan Kelly, president of the Canadian Federation of Independent Business, said the uncertainty “stressed out” many small business owners who faced the prospect of having to return thousands of dollars. He said the government’s response is the right approach.

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“It is good that the government has given the benefit of the doubt to the taxpayer in this case and allowed them to receive and keep the CERB benefits and if they qualified otherwise,” he said.

Mr. Kelly said the situation will create winners and losers in that some people will have missed out on benefits that they could have received, but he said the government can credibly respond that it is addressing a short window of time in which official information was unclear.

“There’s no question there are going to be self-employed people who are going to say, ‘Well, what the heck? I missed out,’” he said.

Conservative MP Peter Kent said the Liberals are moving to fix one of their “many mistakes” created by confused messages on the pandemic file, while NDP MP Peter Julian said the government should not have subjected so many Canadians to “all of the stress that came with the pressure for repayment.”

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