Essar Oil seeks extension on settling VAT arrears in UK
Essar Oil UK (EOUK) on Saturday night rushed out a statement to inform the market it was in negotiations with the British government to extend a settlement of its VAT (valueadded tax) arrears and expected an early resolution.
This seemed to be intended to calm speculation that it may be on the brink of collapse, following media reports to this effect.
The weekend in Britain witnessed a rare shortage of fuel at service stations. This was attributed to a dwindling number of drivers and hauliers caused by the UK’S exit from the European Union. People from the EU are no longer able to automatically work in the UK. Five thousand and five hundred visas are to be issued by the British government on an emergency basis from Monday to ease the inadequate transportation situation.
Pump after pump had run dry in Britain in the last three days, setting off panic purchases. The ones that were opened had mile-long queues of vehicles snaking away from them.
Stanlow supplies about a sixth of Britain’s petrol and diesel. Its closure will accentuate the crisis to fearful proportions.
Essar Oil UK, owned by Shashi and Ravi Ruia, said it was in talks with the British government on deferring VAT payments.
“On future VAT payments,” it said, “EOUK entered into a time-to-pay (TTP) arrangement with HMRC (Her Majesty’s Revenue and Customs) for a total of £770 million in April 2021.” It added: “EOUK has already repaid HMRC £547 million leaving a balance of £223 million, as part of the government opt-inscheme available to all corporates in the UK.”
It claimed: “All companies under the TTP have been given until January 2022 to meet their commitments.”
The company went on to say: “EOUK had agreed to an accelerated schedule to make this payment. However, the recovery from the pandemic has been slower than predicted. EOUK is therefore in discussions with HMRC over a short extension to make those deferred VAT payments.” It maintained: “Those discussions are positive and EOUK looks forward to a resolution soon.”
Defending its contention, EOUK said it “has $1.1 billion in liquidity secured”. It further said “the company has now returned to EBITDA positive and is therefore in a much stronger position to weather the continued challenge presented by the pandemic”.
Regarding the disruption in the supply chain in the oil sector in the UK, EOUK said it had retained its driver base plus signed up smaller hauliers. It added it had enhanced its vehicle shifts per day from 52 to 70 and undertook that “the shift plan is set to increase this further to well over 80 by the end of October”.
“Stanlow (is) operating as normal – supplies to customers continue unaffected – all North West (England) petrol stations supplied by Essar are operating normally.”
EOUK has assured all it “remains confident in its future, not least as the air travel market continues to open up and demand recovers”.
HMRC’S said it was “ready to support viable businesses”.
A source within it said it would “work with customers to review payment plans”.