Synopsis
Draft legislation concerning the proposed UK Carbon Border Adjustment Mechanism (UK CBAM) has been published as part of a consultation.
The UK CBAM will apply a tax on goods imported to the UK from the aluminium, cement, fertiliser, hydrogen and iron and steel sectors on or after 1 January 2027. Importers of CBAM goods would be required to pay the CBAM tax on the respective embodied emissions of the goods they import.
Summary
Draft legislation has been published on the UK Carbon Border Adjustment Mechanism (UK CBAM). This was published as part of a consultation.
This legislation will apply across the UK.
What will change?
If adopted, this draft legislation will implement a UK CBAM. The UK CBAM will concern goods imported within certain sectors on or after 1 January 2027.
The UK CBAM will be a tax on goods imported to the UK from the aluminium, cement, fertiliser, hydrogen and iron and steel sectors. Schedule 1 to the regulations provides commodity codes and classifications for each CBAM good.
Future regulations may set further rules on the operation of the CBAM, including how embodied emissions will be calculated, technical standards for the scheme, requirements on sampling, measurement or analysis and default values to be used in calculating embodied emissions for CBAM goods.
Importer Duties
Importers of CBAM goods will be required to pay the CBAM tax on the respective embodied emissions of the goods they import. Embodied emissions are those attributable to the production of a CBAM good.
A single rate of CBAM tax is expected to be applied per sector (the ‘sectoral domestic price’). These rates will reflect the effective carbon price in the UK Emissions Trading Scheme (UK ETS). The CBAM tax is to be calculated via the following calculation:
CBAM liability = UK CBAM rate (calculated by multiplying the imported embodied emissions by the CBAM rate) minus Carbon Price relief (calculated by multiplying the relevant embodied emissions by the deductible carbon price)
Importers will be required to register with the HMRC for the CBAM when:
Registered or registrable persons must account for any pay the CBAM tax for each quarterly accounting period in each calendar year. The payment must be made before the end of the last working day of the second month following the accounting period. Returns must also be submitted for each accounting period.
Exemptions
Goods will be exempted from the UK CBAM under circumstances including where:
GUIDANCE
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