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September 29, 2021

UK reaches phased tax payment deal with Essar as fuel panic persists

The agreement gives the oil refiner more time to repay the $305m deferred taxes to the British tax authorities.

By Archana Rani

Essar Oil UK, part of Indian conglomerate Essar, has reached a new agreement with UK HM Revenue & Customs (HMRC) to extend the tax payment deadline.

The firm, which operates the 200,000 barrel per day Stanlow refinery, was seeking to extend a January 2021 deadline from HMRC to repay $305m (£223m) deferred taxes citing delays due to the pandemic.

The taxes are related to the UK Government’s pandemic VAT deferral scheme, which was utilised by the firm in 2020.

EOUK chief financial officer Satish Vasooja said: “With this time to pay arrangement, we now have significant runway to stabilise our balance sheet which has been adversely impacted by the pandemic.

“The improved environment around margins gives us the confidence to continue to serve as one of the UK key fuel suppliers with a 16% market share. We will also progress our future energy transition programme whilst also supporting a large proportion of the UK’s much needed fuel supply.”

EOUK said the new agreement, which is aligned with its revenues, would allow it to close the last mile financings in the coming months.

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Earlier this year, the firm has successfully raised $1.1bn (£0.8bn).

The deal comes amid major energy crisis in the country with fuel prices reaching record levels.

Last week, BP announced the closure of some of its filling station sites due to a post-Brexit shortage of tanker drivers to make deliveries despite the firm having plenty of fuel.

Soon after, Esso, a subsidiary of ExxonMobil, announced similar measures.

Following the announcements, drivers in the UK depleted fuel stores at filling stations, causing more filling stations to close.

The distribution crisis forced the UK Government to suspend competition laws, allowing energy firms to help in easing shortages, reported Reuters.

The shortage was due to the closure of truck driving licence testing during Covid-19 lockdowns and people leaving work in the transport industry.

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