Group tax strategy

Board approval: 26th February 2018


This document has been prepared in accordance with paragraph 16(2), Schedule 19 of the UK Finance Act 2016. It applies from the date of publication until it is superseded.

State Oil Ltd is registered in the UK and is the ultimate holding company of the State Oil Group. Prax is a trading name of State Oil Ltd and Prax Group is used to denote all companies within the State Oil Group.

Prax Group is engaged in the importation, storage, distribution and sale of fuel.

Approach to risk management and governance

Tax risk is the risk that our tax reporting returns or liabilities are inaccurate or incomplete, potentially leading to under or over collection or payment of tax, exposing us to tax authority sanctions as well as potential damage to our reputation. We are subject to the following principal taxes:

  • duty on fuel;
  • value added tax (or its equivalent) on relevant products and services.
  • corporation tax on the profits of our business;
  • employer social security contributions on employment costs; and
  • income tax and social security contributions from employee remuneration.

We manage tax risk within our group wide risk management and governance framework:

  • our Board is accountable for risk management and ensures that an effective Risk Management Framework (RMF) is in place, which encompasses tax risk.
  • tax strategy and our tax function is part of the finance function.
  • we operate an industry standard “three lines of defence” risk management model. Our first line of defence for the majority of our tax risk is our tax function, which owns and assesses tax risk via an annual risk and control self-assessment. The tax function also promotes a culture of good governance, open communication and compliance and its key objective is to ensure that all tax returns, reports and payments are accurate and complete to the best of our knowledge and filed on a timely basis.
  • where tax risk resides in other operating functions across the business, similar risk and control self-assessments are conducted and where key risks are identified, controls are implemented and processes put in place to mitigate those risks.
  • our risk and compliance function is the second line of defence, providing oversight and challenge group-wide, with any material issues being reported to our board.
  • our tax processes and risk governance arrangements are periodically subject to audit, which is the third line of defence, with audit reports provided directly to the Board.

Risk appetite

Our appetite for tax risk is low. Our business model and operating structure is straightforward and not subject to significant judgement in the application of tax law. We do not seek to artificially manipulate our business affairs in order to unreasonably minimise our tax liabilities and aim to pay the right amount of tax in accordance with the spirit of the law in all jurisdictions where we have economic substance.

The Group’s attitude to tax planning

While we will run our business in a cost-effective manner in line with our obligations to our shareholders and clients, in terms of tax, we will only utilise legitimate tax reliefs for the purposes for which they were intended by Parliament. We do not:

  • engage in aggressive tax planning;
  • seek to structure transactions in an artificial manner whereby results are inconsistent with the underlying economic consequences; or
  • promote tax avoidance or condone abusive tax practices which would contravene our ethics and culture or the law.

We believe in safeguarding our reputation and our relationships with clients, shareholders and tax authorities alike and we are not subject to undue shareholder influence.

We will seek external tax advice in certain situations, for example:

  • in respect of large, one off transactions such as business acquisitions or disposals, to ensure that we do not suffer any unforeseen or unreasonable tax outcomes;
  • in areas where we may have insufficient internal expertise; and
  • as a second opinion in cases where we believe there is uncertainty with respect to the application of tax law, although we may also approach HMRC directly, to seek clarity or obtain clearance.

Our approach to dealings with HMRC

  • Our objective is to build a stable, transparent and professional working relationship with HMRC and other tax authorities.
  • we believe in fostering trust and co-operation in our relationships with tax authorities. We value the fact that, as an HMRC defined “large business”, we have a direct Customer Relationship Manager with whom we can proactively engage in dialogue to resolve issues, obtain clarity on aspects of uncertainty and provide early notification of business developments likely to have tax consequences.
  • we take a proactive approach and take appropriate action in the event we discover errors or omissions; disclosing to HMRC, implementing remediation as quickly as is reasonably achievable and putting in place measures and controls to prevent recurrence.