Brookhouse To Pay KRA Kshs 140 Million For Lowering School Fees

Brookhouse International School has been ordered to pay 140 million shillings after lowering its school fees requirements for a section of its clientele. The institution was ordered to part with millions as the tax owed to Kenya Revenue Authority (KRA).

According to Justice David Majanja, the facility granted to the employees by the school is a taxable benefit for which the employee is liable, and the school also had an obligation to collect pay-as-you-earn (PAYE).

Brookhouse School had reportedly subsidized tuition fees it offered to its staff members between 2010 and 2014.

“I find the commissioner’s position reasonable since staff members would pay the normal and ordinary school fees, which constitute the market rate, but for the employment-related benefit,” the judge said.

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 to the tax computation

The court rejected the argument by Brookhouse that there was ambiguity in law on what value to be attached to non-cash benefits according to its employees

The KRA did an audit of the school’s account between 2010 and 2014 and communicated its finding in 2017 claiming taxes amounting to Sh186.6 million. The taxes included PAYE, corporate tax, and withholding tax.

The management of the school objected to the computation, especially on PAYE and non-cash benefits granted to its staff.

The school argued that in the absence of clear legislation on taxation of school fees benefits, it charges its teachers 15 percent of the applicable school fees in accordance with best practice, which requires that the teachers pay the cost of delivery of the services.

In the alternative, the school argued that even if the taxman were to take the view that the school fees benefits are taxable, then it should not be subject to the full 85 percent of the benefits tax but 10 percent.