Businesses importing certain carbon-intensive goods into the UK will face a new carbon tax from 1 January 2027, when the Carbon Border Adjustment Mechanism (CBAM) comes into effect.
CBAM will apply to specified goods imported from outside the UK in the aluminium, cement, fertiliser, hydrogen, and iron and steel sectors. The tax is intended to put a comparable carbon price on imported goods to that paid by UK manufacturers. Not every product within these sectors is covered, so businesses will need to check the relevant commodity codes. This should help ensure that these UK decarbonisation efforts lead to a true reduction in global emissions rather than simply displacing carbon emissions overseas.
The person liable for CBAM will generally be the importer named on the customs declaration. Businesses importing CBAM goods will need to keep records, including information about the weight and emissions associated with the goods, and may need to register with HMRC.
A £50,000 threshold applies when determining whether registration is required. Businesses must monitor both a forward-looking test of expected imports over the next 30 days and a backward-looking test looking at the value of relevant imports over the preceding 12 months. If a person meets either test, they become liable to register.
The first CBAM accounting period will run from 1 January to 31 December 2027, with the first return and payment due by 31 May 2028. From 2028, accounting periods will transition to a quarterly cycle. For CBAM goods imported during the first calendar year of CBAM the backward looking test is only required to 1 January 2027.
Businesses importing potentially affected goods should check their position now and make sure they have the necessary records and systems in place before CBAM takes effect.
