Brookhouse School fights Sh183million KRA demand

Elite learning institution, Brookhouse School, is fighting off a Sh183.92 million demand in taxes and penalties by the taxman linked to subsidised tuition fees for staff.

In an appeal to the Tax Appeals Tribunal (TAT), Brookhouse School is seeking orders to bar Kenya Revenue Authority (KRA) from collecting Sh140.22 million in Pay-As-You-Earn (PAYE) and Sh43.7 million in withholding taxes due for the period between 2010 and 2014.

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

Brookhouse School describes 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.

The school also faults KRA for seeking the withholding tax from payments made to Othaya Group Limited and Mauritian firm, Bellur Holdings for construction of a log house.

KRA wrote to Brookhouse School in June 2017 demanding Sh186.66 million, but later reviewed the amount to Sh183.92 million after slashing Sh2.74 million for corporation tax.

“The appellant prays that the respondent (KRA), its employees, agents and other person purporting to act on its behalf be barred from and or stopped from demanding or taking any further steps towards enforcement or recovery of principal tax, penalties and interest,” Brookhouse School says in the appeal.

Under the Tax Procedures Act, the taxman can appoint banks as agents in collecting taxes as well as seizure and auctioning property to recover unpaid taxes. The commissioner is also empowered to hold as security an asset such as land or a building owned by a taxpayer who has defaulted in payment of tax.

The taxman is also demanding withholding tax from Sh5 million in supervision fees paid to Othaya Group Limited and from Sh138.8 million paid to the Mauritian firm as contract fees for Wangari Maathai log house.

The log house consisting six classrooms, a multi-purpose and several administrative offices was constructed using wood imported from Holland. TAT ordered a review of the tax demand on the non-cash benefits to children of Brookhouse School’s teachers in line with the Income Tax Act in the latest battle pitting the taxman and private firms.