UK CBAM: HMRC Publishes New Compliance Guidance

In October and November, HMRC published a comprehensive guidance package to help businesses prepare for the introduction of the UK Carbon Border Adjustment Mechanism (CBAM), which is scheduled to take effect on January 1, 2027. In particular, the guidance helps importers and other businesses understand how to calculate potential CBAM liabilities and comply with the new emissions monitoring, reporting, and verification requirements.

What the CBAM Guidance Package Covers

The package provides default emissions values for products across all five sectors covered by the UK CBAM, alongside illustrative CBAM rates and a practical calculation example explaining how the rates are determined.

*tCO₂e = tonnes of carbon dioxide equivalent

These CBAM rates are indicative estimates only and do not create any actual tax liability. The first legally applicable rates, covering the period from January 1 to March 31, 2027, will be published before the end of 2026. Afterward, HMRC will update the rates every quarter.

The guidance package also includes a detailed 313-page technical guide setting out the procedures for monitoring, reporting, and verifying emissions, particularly for installation operators, independent verifiers, and accreditation bodies. Additional guidance explains how importers should obtain emissions intensity data for imported goods and report this information to HMRC. Separate instructions clarify who verifies emissions data, the accreditation standards that verifiers must meet, and their verification and reporting responsibilities.

Steps to Take Before January 1, 2027

Before the UK CBAM takes effect on January 1, 2027, businesses should take several steps to assess their potential exposure and prepare for the new compliance requirements. 

First, businesses should review and update their CBAM impact assessments using HMRC's published default emissions values and illustrative rates. Second, businesses should engage with their suppliers to determine whether they can provide verified actual emissions data. 

Finally, businesses should establish appropriate internal governance and compliance procedures. This involves aligning product classifications, supplier information, and emissions data, reviewing contractual arrangements to ensure suppliers provide and verify emissions information, and monitoring further HMRC guidance, particularly the publication of the first legally effective CBAM rates.

Conclusion

The HMRC guidance marks an important step in implementing the UK CBAM. With many key policy details now clarified, businesses can shift their focus from understanding the rules to putting compliance arrangements into practice.