Owners of Essar Oil UK are currently trying to avoid financial collapse by talking to HMRC about their overdue tax bill. Given the UK’s current situation, it’s important that we don’t lose the company that’s supplied one sixth of the fuel we need.

You might be struggling to get petrol or diesel due to everyone panic-buying a the same time. What we don’t need is an actual shortage of any fuels that then impact distribution of everything else. Resolving this company’s financial predicament is to the benefit of us all.

Who are Essar Oil UK?

Shashi and Ravi Ruia own Essar Oil UK. Stanlow Refinery in Ellesmere Port produces 4.4 billion litres of diesel, 3 billion litres of petrol and 2 billion litres of jet fuel a year. That’s one sixth of the UK’s total road transport fuels, and the jet fuel for both Birmingham and Manchester airports.

The huge site directly employs 900 people, 800 contractors and an additional 5,000 people indirectly through the connected chain.

What kind of financial trouble are they in?

Essar Oil UK used HMRC’s VAT deferral scheme, as they were completely entitled to do. This was part of the package of support brought in to help businesses survive the COVID-19 pandemic. It’s a simple, but effective, idea – defer your VAT bill until March 2021. Then you had the option to use an instalment plan until June, pay it all in one go, or discuss another payment option with HMRC.

In April 2021, Essar Oil UK started a Time To Pay instalment plan with HMRC for £770 million. It’s already paid off £547 million, with £223 million outstanding. The deadline for this is January 2022 and they should make their first payment now.

But they can’t afford to make this first instalment. Neither aviation fuel, nor road transport fuel sales have increased at the pace they expected. They aren’t asking for the debt to be written off, but are asking HMRC for more time in an altered payment schedule. They “returned to cashflow positive in July as volumes steadily increased”, which can only be a good sign.

Is a resolution likely?

An Essar Oil UK spokesperson said:

“EOUK also confirms it has met all its VAT repayments with HMRC up to now, but anticipates that it may need additional time to make payment of an amount originally deferred from May 2020, within the original time to pay schedule, in line with all other businesses during the pandemic.

“EOUK is in talks with HMRC to defer that payment as it continues to recover from the impact of the pandemic on its operations.

“We are confident in our future and our current liquidity position, but as a responsible corporate we need to plan for all eventualities, while the pandemic continues to impact us.”

Just like any other government department, the Department for Business, Energy and Industrial Strategy won’t make any comment about an individual business. In a generalised statement, they say: “The government put in place a far reaching package of support to help businesses across the economy during the pandemic, including the furlough scheme, loans and VAT deferrals. The government continually monitors fuel supply across the country to ensure the public do not see any disruption.”

As it’s in everyone’s interest for Stanlow Refinery to remain trading, it’s hoped that discussions will bring about a sensible solution for both parties.