By Sam Thake, Customs Consultancy Manager, Denholm Good Logistics
Executive summary: UK CBAM 2027
The Carbon Border Adjustment Mechanism (CBAM), effective from 1 January 2027, introduces a direct carbon cost on emissions-intensive goods imported into the UK, aligning them with the carbon price applied to domestic production. While the start date is 2027, the complexity of data, systems, and supplier engagement means action is required now.
CBAM will apply across key sectors including aluminium, cement, fertilisers, hydrogen, iron and steel, with liability sitting with the importer. Businesses exceeding £50,000 of in-scope imports annually will be required to register with HMRC, submit detailed returns, and maintain robust, auditable records.
Crucially, cost exposure will be driven by data quality. Default emissions values are expected to be conservative and therefore more expensive, while verified supplier data can significantly reduce liability and unlock carbon price relief. Securing accurate, verified emissions data will be one of the biggest practical challenges.
CBAM is not just a compliance exercise—it is expected to materially impact landed cost, supplier selection, and pricing strategy. It introduces new financial, operational, and compliance risks, requiring coordinated ownership across finance, procurement, sustainability, and logistics functions.
Businesses that move early to quantify exposure, engage suppliers, and implement effective data and reporting processes will be better placed to manage cost, protect margins, and maintain competitiveness in an increasingly carbon-constrained market.
What is CBAM?
The Carbon Border Adjustment Mechanism (CBAM) will come into effect on 1 January 2027. It introduces a carbon cost on emissions-intensive goods imported into the UK, ensuring they are subject to a comparable carbon price as domestically produced goods. As a result, CBAM is expected to increase the cost of imports and may materially influence landed cost, supplier selection, and pricing strategies.
CBAM places a carbon price on the embodied emissions in imports of specified goods within the aluminium, cement, fertiliser, hydrogen, iron and steel sectors. The goods covered in these sectors are referred to as ‘CBAM goods’, they are identified by the commodity codes listed within the UK Annex.
Where does it apply?
It applies to the whole of the UK including Northern Ireland, on goods imported to the UK including from Crown Dependencies, Isle of Man, Overseas Territories and the UK Continental Shelf.
Who is liable?
The importer of the CBAM goods is the liable person for CBAM, the liable person can appoint a tax agent to act on their behalf to submit CBAM returns.
CBAM liability applies to the full imported CBAM good at the point it enters the UK market.
Who needs to register?
Anyone importing over £50,000 of CBAM goods in a 12 month period needs to register with HMRC and account for CBAM, anyone importing CBAM goods should review their imports to monitor if they need to register.
Any businesses that do not pass the minimum threshold do not need to register and account for CBAM but will need to submit nil returns.
Are there any exemptions
Private individuals that import CBAM goods for non-commercial purposes, goods of UK origin and temporary admission goods given full customs duty relief are not liable for CBAM.
Goods being imported to the UK with returned goods relief being claimed are also not liable, as are ‘Union goods’ exported from Northern Ireland into the EU and re-imported to the UK.
The importer does not need to be the same person that exported the goods to claim relief for CBAM.
UK produced precursor goods that are imported as part of a complex CBAM good are also exempt, the emissions attributed to these precursor goods can be deducted from the total embodied emissions of the CBAM good.
When do I need to account for CBAM
The first accounting period covers the whole of 2027, January 1st to December 31st 2027. Returns and payments are due by the 31st of May 2028. From the 1st of January 2028 accounting periods become quarterly and then transition to 2 months. Despite a 2027 start date, preparation is required now due to the lead time needed to obtain verified supplier data and implement internal processes.
What information is needed on a CBAM return?
Each consignment and each CBAM good must be reported separately on a return and they must include;
- 8 digit commodity code when goods passed tax point
- Net weight of goods in kg at time of import
- Emissions intensity in the CBAM good in tCO2e per functional unit (default or actual)
- Embodied emissions in precursor goods where the emissions are exempt
- Amount of carbon price incurred on the CBAM goods in GBP
- The quarter in which the CBAM good passed the tax point
- Country of origin
Can I amend a return
Amendments can be made within 3 years of an accounting period ending, repayments will be made where an error on the return has resulted in an overpayment. Sufficient evidence must be held and available upon request by HMRC.
What records must I keep and how long for?
Records must be kept for at least 6 years after the end of an accounting period, records must include:
- Import declaration
- Transport documents
- Special procedure discharge documents
- Commercial documents
- Customs duty calculation documents
- Documents related to remission or repayment of duty
- Evidence of exempted UK origin precursor goods that are re-imported
- Registration information
- Carbon Price Relief (CPR) verified and published data used to calculate the CPR.
- Actual emissions data
For CPR and actual emissions data the record keeping requirements are significant.
Are there any consequences for failing to comply with CBAM?
Failure to comply with CBAM can result in penalties, this includes:
- Failure to notify HMRC of CBAM liability
- Failure to submit a CBAM return
- Failure to pay CBAM
- Errors in returns or other documents
- Failure to disclose relevant tax avoidance schemes and serial tax avoidance
- Failure to comply with an information notice
HMRC will introduce a general penalty for failure to comply with CBAM requirements, including; notifying HMRC of address changes, relevant personnel changes and artificial separation of business activities to avoid liability to the tax.
Criminal offences will apply to fraudulent evasion and deliberate misstatements of CBAM.
HMRC will compulsorily register importers liable for CBAM and assess the amount of CBAM due if they fail to register and/or complete accurate returns.
Calculating CBAM liability
CBAM liability is calculated by applying a specific calculation, simply it is the UK CBAM liability minus the Carbon price relief (if applicable).
The UK CBAM liability is calculated by multiplying the imported embodied emissions of a CBAM good by the CBAM rate.
The Carbon price relief (CPR) is calculated by multiplying the relevant imported embodied emissions by the effective carbon price already paid.
Emissions intensity is expressed in tonnes of carbon dioxide equivalent (tCO2e per functional unit). Cement is expressed as tonnes of clinker and fertilisers as tonnes of nitrogen contained in those goods.
To calculate the embodied emissions of the imported CBAM good the emissions intensity must be multiplied by the weight of the imported CBAM good (measured in tonnes).
Default vs actual emissions data
There are two types of emissions data a liable person can use to determine embodied emissions, the default values published by the government or actual emissions data obtained by verified suppliers. The availability and reliability of supplier emissions data is expected to be a key challenge.
Actual emissions data
To use actual emissions data the liable person will need verified emissions data from the producer of the CBAM goods, the verified emissions intensity is set out in an emissions verification report provided by the supplier of the CBAM good.
The liable person can either use verified emissions intensity data linked to the date of importation or date of production of the CBAM good.
Verifiers of this data must be independent, impartial and accredited by an eligible accreditation body for CBAM against ISO/IEC 17029:2019 & ISO 14065:2020. They must also be accredited for the scope of activities they are verifying.
In many cases, verified actual emissions data may reduce CBAM liability compared to default values. Verified data will also allow for carbon price relief to be applied.
Default emissions data
There will be one default emissions value set per CBAM good which can be amended or updated by HM Treasury.
Default values are expected to be conservative and may result in higher CBAM liability compared to verified actual emissions data.
Types of emissions
UK CBAM will apply to direct emissions only, indirect emissions are not in scope.
Direct emissions are emissions from the production processing of a CBAM good.
Government has indicated indirect emissions may be incorporated into scope in future phases of UK CBAM.
CBAM rate
There will be a single CBAM rate per sector and the rate will mirror the effective carbon price in the UK and be set using the UK ETS.
CBAM rates will be published at the beginning of each quarter and the relevant rate to apply to calculations is the rate that is in effect at the time of import.
Carbon price relief
CPR can be claimed to reduce CBAM liability if the imported CBAM goods have been subject to a qualifying carbon price scheme and verification documents are available. The importer is liable to calculate the CPR.
A qualifying carbon price scheme must be a carbon tax, ETS or scheme that prices emissions embodied in imported goods.
CPR can only be claimed where verified emissions data is available.
CBAM policy summary
The full CBAM policy summary can be found here along with the Annex of commodity codes within the CBAM scope: Carbon border adjustment mechanism (CBAM): Policy Summary – GOV.UK
How importers can prepare now
To prepare for CBAM importers can take steps now:
1) Review 2025 and 2026 YTD import data:
a) Use the Annex in the CBAM policy summary to identify volumes imported of each CBAM goods from each sector
b) Conduct an impact assessment using historical UK ETS values for cost analysis
2) Request suppliers of CBAM goods to:
a) Take steps to provide verified actual emissions data (list of accredited verifiers not yet published)
b) Provide verified evidence of any carbon price already paid on the CBAM goods
3) Collate records to meet record keeping requirements (See ‘What records must I keep and how long for?’ section of this document)
How importers can prepare now
4) Implement a record keeping procedure internally to meet requirements;
a) Engage finance teams to assist, CBAM is a tax and HMRC will treat similar to other tax accounting processes
5) Calculate estimated tonnage using embodied emissions actual values or default values (default values expected late 2026)
6) 1st January 2027 liability tests applied:
a) Backward-looking: Each month check if total value of imported CBAM goods equals or exceeds £50,000
b) Forward-looking: if you expect the value of imported CBAM goods to equal or exceed £50,000
7) Once triggered register via Government Gateway portal
How Denholm Good Logistics can help
We can support you on every stage of your CBAM compliance journey
- Identification of CBAM goods
- Monitoring volumes and calculating liability
- Preparation of reports ready for CBAM returns
- Tailored reports to meet specific requirements
- Ongoing guidance and support
Contact our CBAM team today
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