THE ONE-PARAGRAPH VERSION
UK CBAM is a tax administered by HMRC, charged on the greenhouse gas emissions embodied in in-scope goods at the point they are imported into the UK (Finance Act 2026, s.143). For each import, the liability is broadly: weight of the good x embodied emissions per tonne (verified actual data or the HM Treasury default value) x the sector CBAM rate in force for that quarter, minus any Carbon Price Relief for carbon prices already paid overseas. Unlike the EU regime, there is no reporting-only transitional phase: imports from 1 January 2027 are chargeable. The first return and payment, covering the whole of 2027, are due by 31 May 2028. Because the cash and the return fall due well after the goods have arrived and been sold, the process has to capture the right data at the moment of purchase and import, not at year-end.
SCOPE CHECK FOR YOUR PRODUCTS
All of the semi-finished and finished aluminium headings are in scope under Schedule 16 FA 2026: 7601 (unwrought), 7603 to 7608 (powders, bars/rods/profiles, wire, plate/sheet/strip, foil, tubes and pipes), 7609, 7610, 7611, 7612, 7613, 7614 and 7616. Aluminium waste and scrap (7602) is not. Goods of UK origin and goods qualifying for returned goods relief are exempt (s.147(2)). EU-origin aluminium is in scope: no exemption exists unless and until the UK and EU link their emissions trading systems, and that has not happened.
The gases counted for aluminium are CO2 and perfluorocarbons (PFCs). Indirect emissions from electricity are not included at commencement.
STEP 1: PURCHASING - SUPPLIER ONBOARDING AND CONTRACTS (now, before 1 January 2027)
This is the step that determines your cost for the whole of 2027, and it needs to be done before orders for January arrivals are placed.
(a) Map every SKU to its 8-digit commodity code and confirm each supplier's production installation(s). Rolled and extruded products are "complex goods": their embodied emissions include the emissions of the unwrought aluminium (precursor) used to make them, so you need data from the rolling or extrusion mill and about the primary metal it consumed.
(b) Decide, supplier by supplier, whether you will report verified actual emissions or HM Treasury default values. Default values are deliberately set so that there is no advantage in using them over actual data (Schedule 17 para 11(3)-(4)). For low-carbon suppliers, actual data will usually be materially cheaper.
(c) Build CBAM data obligations into purchase contracts and supplier terms: provision of installation details, emissions intensity per product, precursor data, the verification report (or a good-specific verification summary) from an independent, accredited verifier, the production month for each batch, and, if Carbon Price Relief is to be claimed, the carbon pricing evidence and verification form. Set a contractual delivery date for verified data comfortably ahead of your return deadline.
(d) Confirm who will be the importer for CBAM purposes. Liability follows the customs declaration: the importer is the person in whose name the declaration is made or, if made by an agent, the person on whose behalf it is made (s.146). Under DDP terms or where a supplier's agent declares the goods, the liability may sit with someone other than you, so check your Incoterms and broker arrangements.
IMPORTANT: once you file a return using default values for a good, you cannot later amend it to substitute verified actual data (Schedule 17 para 8(2)). The supplier data has to be in hand before you file. This is the single most important timing point in the regime.
STEP 2: SALES - CUSTOMER ORDER AND PRICING
CBAM is a cost of import, not a tax on your onward sale, so it is not charged to your customers on the invoice in the way VAT is. Whether and how you recover it is a commercial matter.
(a) Build an estimated CBAM cost per tonne into quotations for each product/supplier combination (emissions intensity x expected CBAM rate).
(b) The CBAM rate is set quarterly by sector, so the rate applying to a shipment depends on the quarter in which it is imported, which may differ from the quarter in which you quote. Consider a CBAM pass-through or adjustment clause for longer-dated or fixed-price contracts.
(c) Where you offer material from different mills, the CBAM cost difference between them can now be a genuine price and sales differentiator.
STEP 3: SHIPMENT AND CUSTOMS ENTRY - THE TAX POINT
(a) The charge arises when the goods are imported for CBAM purposes, which for most of your flows is when liability to import duty is incurred, i.e. on release to free circulation (s.144). It does not arise at order, invoice, shipment or onward sale.
(b) Special procedures need specific handling. Goods held in a customs warehouse or free zone are charged when they are released into free circulation. Goods entered for inward processing and then re-exported are generally not charged; where processing turns a CBAM good into a non-CBAM good that is then imported, CBAM is charged on the emissions embodied in the original CBAM good (s.145). Temporary admission with full relief is outside the charge; partial relief is not (s.147(4)-(5)).
(c) Imports into Northern Ireland are in scope.
(d) Instruct your customs broker to provide, for every entry of a CBAM good, the declaration reference, acceptance date, commodity code, net weight, customs value, origin and the declarant/representation basis. That broker data is the backbone of your CBAM return.
STEP 4: STOCK CONTROL - TRACEABILITY FROM IMPORT ENTRY TO SUPPLIER DATA
Each import must be traceable to the installation that produced it and to the emissions data used. For every inbound lot, stock control should record: customs entry reference and date; 8-digit commodity code; net weight in kilograms at import (excluding packing); customs value; place of origin; supplier, mill/installation and operator; and production month (needed where you rely on the year of production as the monitoring period). Mill certificates and packing lists should be retained as weight and origin evidence; HMRC can determine weight itself where records are inadequate.
Where the same commodity code is bought from several mills, stock records must keep those lots distinguishable. Blending them in the ledger will usually force you onto default values.
STEP 5: EMISSIONS DATA - COLLECTION AND VERIFICATION
(a) Monitoring periods are calendar years. For goods imported in 2027, the emissions data must relate to either the calendar year of import (2027) or the calendar year of production. For goods imported from 2028 onwards, you may use the most recent verified year from the two preceding calendar years, or the year of production.
(b) The practical consequence for 2027: if a supplier reports on its 2027 calendar year, its data cannot be verified until early 2028, and you need it before 31 May 2028. Agree a verification timetable with each supplier now. Material produced in 2026 and imported in 2027 can use 2026 data, if verified.
(c) Verification must be carried out by a verifier independent of you and of the producing installations, accredited by a recognised accreditation body (such as UKAS or another IAF-member body) for the relevant goods. UK requirements are closely aligned with the EU CBAM methodology, so a supplier's EU CBAM data is a strong starting point, but you should check that its verification meets the UK requirements rather than assume it does.
(d) Where verified data is incomplete or arrives late, the default value for that good (or precursor) applies. You can use actual data for the finished product and defaults for a precursor, which is often the realistic position where a rolling mill knows its own emissions but not those of its metal suppliers.
STEP 6: FINANCE - CALCULATION, ACCRUAL AND CARBON PRICE RELIEF
(a) Calculate the liability per import: net weight x emissions intensity (actual or default) x the sector rate for the quarter of import, less Carbon Price Relief. HMRC may require the CBAM service's own calculator to be used for the figures in the return.
(b) Accrue the liability as goods are imported. For 2027, a full year's liability is paid in a single payment on 31 May 2028, which is a material cash and budgeting item.
(c) Carbon Price Relief is available only where an eligible carbon price has actually been paid on the embodied emissions in the country of production, and must be supported by the prescribed carbon pricing verification form and records. Relief cannot exceed the CBAM liability on the good. For EU-produced material, do not assume that the EU ETS or EU CBAM costs will qualify; this needs to be confirmed case by case.
STEP 7: REGISTRATION
You must register with HMRC if your CBAM imports reached £50,000 in value over the previous 12 months, or are expected to reach £50,000 within the next 30 days (Schedule 17 para 2), with value measured on a customs value basis. Given your volumes you will be within this from January 2027. Registration is through the HMRC CBAM service on your Government Gateway account and requires your business details, EORI/VAT numbers, the date you triggered registration and estimated CBAM import volumes. For 2027, the deadline is 31 January 2028, but we recommend registering as soon as HMRC allows. Changes to registration details must be notified within 30 days (para 4).
STEP 8: RETURN AND PAYMENT
The return is made through the CBAM service and, for each CBAM good imported, includes the 8-digit commodity code, weight, the default value or verified emissions intensity used (including for precursors), Carbon Price Relief claimed and place of origin, together with a declaration that it is true and accurate.
Deadlines:
- 2027 (annual period, 1 Jan to 31 Dec 2027): return and payment by 31 May 2028
- Q1 2028: by 31 July 2028
- Q2 2028: by 29 September 2028
- From Q3 2028: by the last working day of the second month after the quarter (e.g. Q3 2028 by 30 November 2028; Q4 2028 by 28 February 2029)
A return is required for every period while you are registered, including nil returns. Payment is by Direct Debit, online/telephone banking or card. Late payment interest applies.
STEP 9: AFTER SUBMISSION
- Amendments are permitted only to correct errors and must be made through the CBAM service within three years of the end of the period. Default values cannot be replaced by actual data (see Step 1).
- Records must be kept for six years from the end of the accounting period, including weight evidence, origin evidence, verification reports and emissions intensities, and Carbon Price Relief evidence.
- HMRC can assess within four years (20 years for deliberate loss or failure to register). Late filing, late payment and inaccuracy penalties follow the modern HMRC regimes, and there is a £500 penalty for each record-keeping failure.
WHO DOES WHAT
Purchasing: commodity code mapping with customs; supplier and installation identification; CBAM data and verification clauses; actual vs default decision per supplier; chasing verified data to deadline.
Sales: CBAM cost in quotations; pass-through and adjustment clauses; quarterly rate updates into pricing.
Stock control / logistics: broker data capture per entry; lot-level traceability to mill and production month; weight and origin evidence; special procedure tracking.
Finance / tax: registration; quarterly liability calculation and accrual; Carbon Price Relief claims; return filing and payment; record retention; oversight of the threshold.
We would suggest a single named CBAM owner, usually within finance or tax, with a monthly reconciliation of broker import data against supplier emissions data.
QUESTIONS WE ARE OFTEN ASKED
Do we pay CBAM at the border? No. Unlike customs duty, CBAM is accounted for on a periodic return after the period ends, not at clearance.
Can we file on defaults now and correct to actuals later? No. This is the most common misconception. A default-based return cannot be amended to actual data.
Our supplier already reports under EU CBAM, so are we covered? Partly. The methodologies are closely aligned, not identical, and UK verification and data requirements need to be checked. The EU data is still the best starting point.
What if a supplier will not provide data? Default values apply to its material. Given that defaults are set at a level designed to avoid any advantage, that supplier's material will carry a cost premium, which may affect your sourcing decisions.
Where things stand: the charge, registration, returns and penalties are set out in the Finance Act 2026 (Part 5, Schedules 16 to 19). The supporting regulations and HMRC notices with force of law cover administration, emissions and verification, and Carbon Price Relief. HMRC published illustrative CBAM rates and draft default values on 16 October. The final default values and the Q1 2027 rate are due before 1 January 2027, and we will update you once they are published.
NEXT STEPS
The binding constraint is supplier data, not filing: the 2027 monitoring period starts in under 11 weeks. We would recommend (1) a scoping exercise mapping your 2026 import data by commodity code, mill and origin to estimate your 2027 exposure under actual and default scenarios, and (2) a supplier outreach programme for your highest-volume mills before year-end.
CarbonChain's platform is built for exactly this workflow. Our Supplier Catalogue collects and validates installation-level emissions and verification data from your mills, links it to your import lines, calculates embedded emissions and liability by quarter, and prepares the return data. We would be happy to run a working session with your purchasing, stock control and finance leads to map your current process against the steps above.