PAYE

Brookhouse gets Sh140m KRA bill over scholarships

Amount also includes discounted fees for children of its teachers and other staffers.

In Summary

• The court rejected the argument by the school that there was an ambiguity in law on what value to be attached to the benefits.

•  The ruling was delivered on April 9.

Brookhouse Schools
Brookhouse Schools

The High Court has found that Brookhouse Schools should pay PAYE totalling Sh140,217,163 for non-cash benefits to their employees.

Some of these include discounted fees and scholarships for children of its teachers and other staffers. 

The court rejected the argument by the school that there was an ambiguity in law on what value to be attached to the benefits. The ruling was delivered on April 9.

The Tax Appeals Tribunal had ruled that the school should not pay PAYE on the value of school fees waived for employees’ children. 

It said KRA should have disallowed the cost of providing the benefit and subjected it to corporation tax.  KRA appealed.  

The tax agency said where the employer is not the provider of the education but has paid fees to a school as per a school fees structure, that would be an actual expense.

In this case, the school was the provider of the education benefit. The value of the benefit is the school fees forgone by the school, which is not a direct expense that can be added back in the tax computation. 

The authority said there is no ambiguity in the Income Tax Act as to taxation of benefits from employment. 

Last year, Brookhouse School moved to the tribunal seeking orders to bar KRA from collecting Sh140 million in PAYE and Sh43.7 million in withholding taxes due for the period between 2010 and 2014.

The institution said KRA had erred in determining the PAYE due from scholarships and sponsorships to children of its staff.

Brookhouse Schools described the discounted fees for children of its teachers as non-cash benefits, adding that the taxman erred by calculating the tax due using the market rate of the fees paid by other students.