Tax Strategy

Scope

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 It applies from the date of publication until it is superseded.

State Oil Ltd is registered in the United Kingdom and is the ultimate operating company of the Prax Group. Prax is the principle trading name and brand of the Prax Group of companies.

The Prax Group is engaged in the importation, exploration, production, storage, distribution, sale, and integrated supply and optimisation of crude oil, and petroleum products.

Our Approach To Risk Management

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.
• our Group Management has bolstered the Group’s risk management function and strengthened the compliance function by enshrining oversight of our risk and compliance functions under an Audit and Risk Committee which has been established since 2022. This Committee is a multi-disciplinary team assembled by the Board to oversee the Group’s risk strategy and ensure that the RMF is implemented in an effective manner to protect the Group from exposure or loss.
• 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, reporting to the Audit and Risk Committee which meets multiple times each year, and 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. Whilst we have expanded our business operations upstream and into new jurisdictions over the last twelve months, we have mitigated this risk by acquiring established businesses in retail and refining industries where we have significant existing expertise and experience.

Our 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;
• utilise tax havens or other offshore vehicles; 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 relation to overseas jurisdictions to ensure that cross-border tax management and transfer-pricing is appropriately structured in advance and to put suitable management frameworks in place to ensure that tax is managed and paid in the relevant jurisdiction;
• 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 collaborative, 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 welcome input and recommendations from HMRC regarding how to develop and implement our tax strategy in today’s changing landscape.
• 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.