The United Kingdom is preparing to operate its carbon border adjustment mechanism as a tax, rather than adopting the European Union’s certificate-based model, creating a separate compliance process for importers when the UK system begins on 1 January 2027.
An official told Carbon Pulse on 29 September that the UK was taking lessons from the EU’s experience while developing the mechanism around its own tax administration. Companies trading into both jurisdictions will therefore need to distinguish the two systems rather than transfer their EU CBAM procedures directly to UK compliance.
Six industrial sectors included initially
According to HM Revenue & Customs, the UK mechanism will initially apply to specified goods covering aluminium, cement, fertiliser, hydrogen, iron and steel.
Access to the registration framework is determined using a statutory GBP 50,000 value threshold. The UK approach uses both backward-looking and forward-looking tests, rather than the EU’s mass-based exemption.
Liable importers will calculate and report a tax liability under the UK framework. Applicable rates will reflect UK carbon-pricing arrangements and sector-specific adjustments instead of the certificate prices published for the EU CBAM.
First UK return due in May 2028
The first accounting period will cover 1 January to 31 December 2027. Under the transitory regulations, the first return and associated payment must be submitted by 31 May 2028.
The longer initial reporting period changes the timing of the first payment and return but does not alter the start date from which relevant imports can generate a liability.
A tax-based mechanism may eliminate the need for importers to establish a separate certificate-purchasing process. It does not, however, remove the underlying data requirements.
Businesses will still need accurate product classifications, supplier emissions information and records supporting claims for applicable relief.
Customs, procurement and tax teams face shared responsibility
For companies preparing for the UK system, an early operational issue is determining how responsibilities are divided between customs, procurement and tax teams.
Each function controls information needed to calculate the liability, while the obligation to report the resulting amount ultimately rests with the liable business.
The UK’s administrative structure differs from the EU model, but importers will still need to combine supplier and shipment information into a supportable calculation of the carbon-related cost attached to covered imports.
