A High Court in a decision rendered on 9th April 2021 found that Brookhouse Schools was liable to pay PAYE totalling KShs.140, 217,163.00 in respect of non-cash benefits accorded to their employees. The Court rejected the argument by the School that there was ambiguity in law on what value to be attached to the benefit.

KRA had filed an Appeal against the decision of the Tax Appeals Tribunal that the school was not liable to pay PAYE on the value of school fees forgone in providing education for the employees’ children and that KRA should have disallowed the cost of providing the benefit and subject the same to Corporation Tax.

KRA’s position was that 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 and 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.

Further, KRA submitted that there is no ambiguity in the Income Tax Act as to taxation of benefits from employment.

This landmark ruling shall guide KRA in dealing with other pending disputes with similar circumstances and improve tax compliance among educational institutions.

Commissioner, Legal Services & Board Coordination-Mr Paul Matuku