Scott asked:

My wife is looking to start a new home-based business in Ontario (sole proprietor). She is currently off on a year-long maternity leave and will go back to her full-time job at the end of the year.

Although the business may generate some revenue prior to her return to work, it is not expected that any profit will be made until after she returns. Given that the business will operate in a deficit while she is off on maternity leave, I assume that this would not affect her EI payments.

However, if the business does generate a profit, this would have to be reported and could claw back some of the EI payments. Basically, is it revenue or profit that impacts EI payments?

John R Mott answered:

The claw back of EI benefits does not apply to maternity, parental or sickness benefits. Consequently, there would be no repayment of benefits computed on your wife's tax return.

Whether the actual payment of maternity benefits would be reduced, based on business income reported, is a different question; and one that I don't have an answer for. It would be best to clarify this with the EI office.

In regards to self-employment, it is net profit and not gross revenues that is relevant in regards to measuring income. However, it is important to note that expenses such as home office or automobile (which represent an apportionment of expenses that would otherwise be personal) are generally ignored.

About the author

John Mott is a chartered accountant and tax specialist with a private practice in mid-town Toronto. He provides tax, accounting and advisory services to individuals and small businesses. He may be visited online at: johnmott.com.

 
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