UK Carbon Border Adjustment Mechanism (CBAM)​

UK Carbon Border Adjustment (UK CBAM) is a new tax which will come into force by 1 January 2027. It is designed to put imports on a level playing field with UK produced goods. A tax, equal to the carbon price paid by UK producers, will be charged on the embedded carbon emissions within imported CBAM goods.

As an excise duty, UK CBAM is within the Senior Accounting Officer regime. Appropriate processes and controls to manage tax risks will be needed to comply with the regime.

As a new tax, CBAM presents challenges in understanding the rules and gathering the evidence required to report the emissions embedded in CBAM goods accurately. ​

From 1 January 2027, UK CBAM will place a carbon price on goods imported within the following sectors:​

• Aluminium​
• Cement​
• Fertiliser​
• Hydrogen ​
• Iron and steel​

Products from the glass and ceramic sectors will be considered for future inclusion but will not be in the scope of the UK CBAM from 2027.​

You must register for UK CBAM and file quarterly returns if you’ve either:​

• Imported £50,000 or more worth of CBAM goods over a 12-month rolling period​
• Intend to import £50,000 or more worth of CBAM goods within the next 30 days​

As CBAM takes effect from 1 January 2027, and the registration tests are conducted at the end of each month, there will be a transitional period during the first year where the value of CBAM goods imported is only assessed back to 1 January 2027. Potentially affected businesses will need to monitor their imports carefully to make sure that they register at the right point.​

Even if you don't import CBAM goods directly, you may be affected by price increases through the supply chain. Understanding the potential impact is key.

UK CBAM will be based on the carbon emissions produced in the manufacture of the imported CBAM goods. You will need to either get verified carbon emissions data from your suppliers, or use the default emissions values published by HMRC.​

A CBAM rate will be set for each sector on a quarterly basis. The CBAM liability will be the embedded carbon emissions associated with imports for each sector, multiplied by the CBAM rate for each sector.​

A reduction of liability will be allowed for direct carbon taxes paid in other territories, subject to holding the evidence of payment. There is also provision for goods from territories with Emissions Trading Schemes (ETS) which are linked to the UK’s ETS to be exempt. This means that EU imports should become exempt at some point in future.

The first step is to consider the potential impact of UK CBAM on your business​

• Are you importing CBAM goods?​
• Will you need to register?​
• Will supplier prices increase as a result of CBAM?
• Can you pass those additional costs on to your customers?​
• Do you need to amend your contracts?​
• Do you need to factor CBAM into commercial agreements and contracts now to mitigate the potential future impact?​
• Who will be responsible for compliance?​
• Can you access the data you need to be compliant?​
• Will you need to communicate with your customers and suppliers?​
• What processes, procedures and controls do you need to put in place?​
• Will you need any systems changes?​

We can help you navigate this new tax with our specialist team and assess the impact using our UK CBAM Tool.

Our specialist environmental tax team can help you with all aspects of CBAM, particularly:

• Carrying out impact assessments
• Identify who has the responsibility for CBAM in your supply chain
• Supply chain due diligence
• Assessing whether you need to register for CBAM
• Providing training to staff
• Running stakeholder workshops for your team to identify the actions required
• Preparing implementation plans
• Developing processes and controls for the management of UK CBAM
• Determination of the CBAM treatment of your imports
• Data collection and processing
• Preparation of CBAM returns
• Liaison with HMRC to agree tax treatment of complex or uncertain areas
• Assistance with HMRC enquiries and investigations