This guide is written for our clients to help make you aware of this incoming regulation and its impact. At Ayesa Engineering, we work across infrastructure and industry, supporting clients with carbon, engineering and delivery challenges. We see how regulation turns into real decisions on projects, costs and risk.
UK CBAM will become part of everyday decision making. Organisations that act early will be better placed to manage cost, reduce risk and strengthen their carbon strategy. Ayesa Engineering supports clients from early strategy through design, delivery and operation. We bring together our expertise to turn regulatory change into practical, workable solutions. This guide is a starting point for that conversation.
What is CBAM?
The UK Carbon Border Adjustment Mechanism (CBAM) is a major change in how carbon is treated in international trade and in how projects across infrastructure, construction and industry will be planned and delivered.
What is its impact?
CBAM will influence material choices, procurement strategies, supply chains, cost models and carbon reporting. It will also change how projects are specified, priced and delivered. For many organisations, the key challenge is not just understanding the rules, but knowing what actions to take.
From 2027, UK CBAM will place a carbon price on certain imported goods based on their embedded emissions. The aim is to prevent carbon leakage, support UK decarbonisation, and create a fairer market between UK and overseas producers. While the principle is straightforward, the impact on organisations will be significant.
UK CBAM: Summary
(Carbon
Border Adjustment Mechanism)
The UK CBAM mechanism is been designed to (1) target the most carbon intensive imports, (2) promote decarbonisation of high-emitting industries by discouraging use of carbon-intensive materials and incentivising cleaner production methods, and (3) level the playing field and eliminate unfair competition between imported and domestic goods.
When does it start?
1st January 2027
Who qualifies in the UK?
• Companies exceeding the minimum EU import threshold of £50,000 over a 12month period qualify for UK CBAM
What imports are covered?
• Steel
• Iron
• Aluminium
• Cement
• Fertiliser
• Hydrogen
What are the requirements?
• Registration with HMRC
• Submission of annual report
• Payment of CBAM liability
UK CBAM: Breakdown
Further guidance is expected to be released by the UK government later in 2026
REQUIREMENTS
• Actual emissions data if available and verifiable
• Fallback if unavailable would be the default emission/tonne figures to be published by HMRC shortly before 1st January 2027.
• Emissions covered by UK CBAM are Scope 1 (i.e. direct emissions from the manufacturing process) and Scope 2 (i.e. indirect emissions from electricity consumed during production), plus direct and indirect embodied emissions for select precursors (e.g. clinker, coke, sinter, ammonia, etc.).
• UK CBAM rates in £ / tCO2e will be published in due course.
• These rates will be based on sector averages and will be reviewed and revised by HMRC on a quarterly basis.
• It is anticipated that the UK CBAM rates will go down over time as the UK domestic industry decarbonises.
• Any carbon liabilities that suppliers are subject to should be taken into account to avoid double taxation.
• Submission of one final annual report, followed by one liability payment for the year much the same way any other corporate tax is paid
• For 2027, companies will have 5 months after 31st December 2027 to submit the annual report and pay the UK CBAM liability.
• Non-compliance with UK CBAM obligations will attract penalties.
• This will include failure to register for the UK CBAM, failure to submit UK CBAM returns and failure to keep records.
• The government intends to apply existing HMRC enforcement powers, including a general regulatory penalty specific to UK CBAM offences.
• For late submissions and payments, the penalty framework is expected to align closely with the VAT penalty points system.
Preparing for UK CBAM: Next Steps
Qualification assessment
Determine whether you qualify for UK CBAM, i.e. whether imports are over the threshold of £50,000 worth of goods per 12-month rolling period
Enrolment
Register with HMRC when the system goes live
Mapping EU imports
Map out supply chain to identify imports and countries of origin; produce a register of all ‘in scope’ products, suppliers, locations, and typical import quantities
01
Impact assessment
Estimate total emissions from EU imports, with available information from suppliers
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Addressing gaps
Use default emissions values associated with each product type provided by HMRC where supplier information not available
Liability estimation
Estimate total liability to be paid at the end of 2027 using CBAM rates released by HMRC for each product type
Questionnaire template
Create a questionnaire with all information required from suppliers, e.g. embodied carbon emissions, precursors, carbon taxes/liabilities.
04
Internal reporting process
Establish an internal process for reporting under UK CBAM; assign roles and responsibilities
09
Supplier engagement
Share questionnaire with suppliers as early as possible in 2026 to allow time to identify and address data gaps
05
Reporting to HMRC
Disclose information to HMRC, pay UK CBAM liability, and prepare UK CBAM compliance statement for your annual report
