{"id":86,"date":"2024-10-10T06:28:00","date_gmt":"2024-10-10T06:28:00","guid":{"rendered":"https:\/\/taxbaraza.co.ke\/?p=86"},"modified":"2025-07-31T13:38:13","modified_gmt":"2025-07-31T13:38:13","slug":"everret-aviation-limited-v-kenya-revenue-authority-2013","status":"publish","type":"post","link":"https:\/\/taxbaraza.co.ke\/?p=86","title":{"rendered":"Case Study: Everret Aviation Limited v Kenya Revenue Authority [2013]"},"content":{"rendered":"\n

<\/p>\n\n\n\n

Introductory Paragraphs: Genesis and Background of the Case<\/strong><\/p>\n\n\n\n

This case arose from a dispute between Everret Aviation Limited<\/strong> and the Kenya Revenue Authority (KRA)<\/strong> regarding the classification of freelance pilots<\/strong>\u2014both resident and non-resident\u2014for purposes of income taxation. Everret Aviation, a provider of helicopter charter services, occasionally engaged freelance pilots for specialized tasks such as evacuations and filming. In 2003, KRA issued a PAYE assessment of KES 6,699,425<\/strong> covering the years 2000\u20132002<\/strong>, asserting that freelance pilots were employees and therefore subject to PAYE.<\/p>\n\n\n\n

Everret disputed the assessment, claiming the pilots were independent contractors<\/strong>. The Income Tax Local Committee<\/strong> held on 2 April 2009<\/strong> that PAYE applied to resident freelance pilots<\/strong> and withholding tax to non-resident freelance pilots<\/strong>. Dissatisfied with this decision, Everret appealed to the High Court<\/strong> under Section 86(2) of the Income Tax Act<\/strong>.<\/p>\n\n\n\n

Background of the Case \u2013 Key Points<\/strong><\/p>\n\n\n\n

    \n
  1. Service Structure<\/strong>: Everret provided various aviation services and hired freelance pilots\u2014some resident, others non-resident\u2014for short-term specialized missions.<\/li>\n\n\n\n
  2. KRA Assessment<\/strong>: On 24 March 2003<\/strong>, KRA demanded PAYE for pilot remuneration from 2000 to 2002<\/strong>, classifying payments as salary income.<\/li>\n\n\n\n
  3. Local Committee Ruling<\/strong>: Decided on 2 April 2009<\/strong> that PAYE was applicable to resident pilots, and withholding tax to non-resident pilots.<\/li>\n\n\n\n
  4. Appeal to High Court<\/strong>: Everret challenged the PAYE liability on resident freelance pilots, arguing they were not employees.<\/li>\n<\/ol>\n\n\n\n

    Appellant\u2019s Submissions (Everret Aviation Ltd)<\/strong><\/p>\n\n\n\n

      \n
    1. Not Employees<\/strong>: Argued freelance pilots were subcontracted for specific, short-term assignments and not integrated into the company.<\/li>\n\n\n\n
    2. No Control or Management<\/strong>: Claimed it had no authority to discipline or supervise the freelance pilots beyond assigning tasks.<\/li>\n\n\n\n
    3. Skill-Based Engagements<\/strong>: Pilots were hired for their specialized skills, often flying under unique circumstances such as external load operations.<\/li>\n\n\n\n
    4. No Monthly Wage<\/strong>: Emphasized that the freelancers were not on a regular wage bill and did not receive benefits typical of employees.<\/li>\n\n\n\n
    5. Contracts of Service vs. for Services<\/strong>: Maintained that the arrangements were contracts for<\/strong> services, not of<\/strong> service.<\/li>\n\n\n\n
    6. Rule 14 Limitation<\/strong>: Highlighted that the Local Committee had no basis for distinguishing between resident and non-resident freelancers offering similar services.<\/li>\n<\/ol>\n\n\n\n

      Respondent\u2019s Submissions (KRA)<\/strong><\/p>\n\n\n\n

        \n
      1. Contracts of Service<\/strong>: Claimed that both resident and non-resident freelance pilots were engaged under contracts of service, subjecting them to PAYE.<\/li>\n\n\n\n
      2. Direct Engagement<\/strong>: Argued that Everret paid the pilots directly for services rendered and had control over assignment and compensation.<\/li>\n\n\n\n
      3. Section 3(2)(a)(ii) of the ITA<\/strong>: Asserted that the pilots\u2019 income constituted gains from employment or services rendered, thus taxable.<\/li>\n\n\n\n
      4. Legal Obligation to Deduct PAYE<\/strong>: Cited Section 37<\/strong> of the ITA, placing a statutory duty on Everret to withhold and remit PAYE.<\/li>\n\n\n\n
      5. PAYE Rules Applicable<\/strong>: Emphasized that even freelance engagements qualified as emoluments under PAYE rules.<\/li>\n\n\n\n
      6. Freelancers Were Part of the Business<\/strong>: Claimed the pilots\u2019 work was integral to Everret\u2019s operations, making them de facto employees.<\/li>\n<\/ol>\n\n\n\n

        Court\u2019s Decision \u2013 Key Points<\/strong><\/p>\n\n\n\n

          \n
        1. Freelancers Were Employees<\/strong>: Held that the freelance resident pilots were engaged under contracts of service<\/strong> and qualified as employees.<\/li>\n\n\n\n
        2. Integration Test Applied<\/strong>: Noted that pilots\u2019 roles were integral to Everret\u2019s core business; thus, they were not independent contractors.<\/li>\n\n\n\n
        3. Control and Remuneration<\/strong>: Concluded that Everret exercised significant control over assignments, terms, and payments\u2014hallmarks of employment.<\/li>\n\n\n\n
        4. Statutory Interpretation<\/strong>: Reiterated that Section 3(2)(a)(ii)<\/strong> and Section 37 of the ITA<\/strong> clearly support the PAYE obligation for such arrangements.<\/li>\n\n\n\n
        5. Appeal Dismissed<\/strong>: The Court dismissed the appeal, upholding the Local Committee\u2019s decision.<\/li>\n\n\n\n
        6. Costs Awarded<\/strong>: Costs awarded to KRA.<\/li>\n<\/ol>\n","protected":false},"excerpt":{"rendered":"

          Introductory Paragraphs: Genesis and Background of the Case This case arose from a dispute between Everret Aviation Limited and the…<\/p>\n","protected":false},"author":1,"featured_media":90,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-86","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized","wpcat-1-id"],"_links":{"self":[{"href":"https:\/\/taxbaraza.co.ke\/index.php?rest_route=\/wp\/v2\/posts\/86","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/taxbaraza.co.ke\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/taxbaraza.co.ke\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/taxbaraza.co.ke\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/taxbaraza.co.ke\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=86"}],"version-history":[{"count":2,"href":"https:\/\/taxbaraza.co.ke\/index.php?rest_route=\/wp\/v2\/posts\/86\/revisions"}],"predecessor-version":[{"id":89,"href":"https:\/\/taxbaraza.co.ke\/index.php?rest_route=\/wp\/v2\/posts\/86\/revisions\/89"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/taxbaraza.co.ke\/index.php?rest_route=\/wp\/v2\/media\/90"}],"wp:attachment":[{"href":"https:\/\/taxbaraza.co.ke\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=86"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/taxbaraza.co.ke\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=86"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/taxbaraza.co.ke\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=86"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}