The emissions machinery for the UK Carbon Border Adjustment Mechanism is no longer a consultation draft. On 8 September 2026 the Treasury and HMRC made The Carbon Border Adjustment Mechanism (Emissions and Verification) Regulations 2026 (SI 2026/995), laid before the Commons on 9 September and coming into force on 1 January 2027. It sits on the July administrative and rate packages and the primary architecture in Finance Act 2026. HMRC’s September Agent Update Issue 147 flagged the second tranche and the supporting notice that has force of law.
If you import — or sit in a PE portfolio that imports — aluminium, cement, fertiliser, hydrogen, or iron and steel products on the CBAM commodity-code list, this is not an ESG side-project. It is a new HMRC-administered tax on embodied emissions: registration threshold, returns, penalties and a relief regime that lives or dies on supplier data quality. The GOV.UK CBAM collection and updated policy summary are now the working board pack.
What SI 995 actually locks
SI 995 is the emissions and verification layer. Together with the July instruments — Administrative Provisions (SI 2026/802), Calculation of CBAM Rate and Carbon Price Relief (SI 2026/809), and the transitory rules — it answers the questions CFOs have been parking since the Finance Act:
- How embodied emissions are calculated — direct emissions within defined system boundaries, including precursor goods used in complex CBAM goods.
- How actual data must be monitored and verified — calendar-year monitoring periods, qualifying verifiers, and force-of-law methodology in the emissions notice.
- What records must sit behind the return — intensity data, weight/functional unit conversions, and verification evidence retained for the usual multi-year HMRC window.
The charge is simple on a slide and messy in the ledger: multiply imported embodied emissions by the CBAM rate, subtract any eligible Carbon Price Relief (CPR) for a qualifying overseas carbon price on the same emissions. Default emissions values apply where actual verified data is missing — and defaults are rarely the importer’s friend. KPMG’s framework note maps rate, CPR and administration; SI 995 is the emissions bolt.
Scope is product-code narrow and supply-chain wide
CBAM applies across the UK, including Northern Ireland, to specified goods in five sectors: aluminium, cement, fertiliser, hydrogen, and iron and steel. Only listed commodity codes are in scope; some scrap lines are excluded. The tax point is usually when the good becomes liable to import duty (or would be, but for a duty disapplication). Special customs procedures — free zones, inward processing, authorised use — do not erase liability; they change when and on what portion the charge crystallises on exit into free circulation.
The liable person is the importer on the customs declaration (or the person on whose behalf it is made). A tax agent may file returns but cannot register for you and does not take the liability. Private non-business imports, UK-origin goods under non-preferential rules, returned goods relief and certain temporary-admission full-relief cases fall out — if the evidence holds.
The commercial trap is the precursor and complex-good stack: emissions in upstream CBAM inputs used to make another CBAM good still sit inside the system boundary. If your UK plant or a PE target converts imported intermediates, the overseas mill data request is tax input, not sustainability colour.
The £50,000 registration tests you must instrument now
Registration is not “wait for a 2028 portal.” Liability tests run from go-live. You register if you meet either:
- a forward-looking test — on any day, CBAM goods expected to pass the tax point in the next 30 days reach or exceed £50,000 customs value; or
- a backward-looking test — on the first day of each month, CBAM goods imported in the preceding 12 months (or from 1 January 2027 in year one) reach or exceed £50,000.
Once triggered, registration clocks start (with first-year transitional ease). From 2028, periods are quarterly (March/June/September/December), with returns and payment generally due by the last working day of the second month after the quarter. 2027 is an annual first period; first return and payment are due by 31 May 2028. Below-threshold importers must still keep records to prove they stay out — a finance and customs job, not a climate-team slide.
Map every EORI-linked import line to the CBAM code list now. Build rolling 12-month and 30-day value monitors. A quiet month under £50k and a restock spike will trip the forward test first.
Actual emissions, defaults and Carbon Price Relief
Liable persons choose actual verified emissions intensity or government default values. Actual data must come from the producer in tCO2e per tonne (or functional-unit rules for cement clinker and fertiliser nitrogen), verified by a qualifying verifier, for a calendar-year monitoring period. SI 995 and the System Boundaries Document define which process steps and precursor emissions count. Intensity can link to date of importation or date of production, with 2027 transitional rules where current-year verification does not yet exist.
Carbon Price Relief is the commercial swing factor. Where the same emissions have already borne a qualifying overseas carbon price, CPR can cut UK liability — not below zero — only with evidence. HMRC’s Carbon Pricing Verification Form is the assurance spine. Free allowances and effective carbon price adjustments matter; a glossy supplier PDF without form and verifier sign-off will not survive enquiry. Currency conversion and CPR records sit in SI 2026/809.
If suppliers cannot deliver verified intensity and CPR packs before Q4 2026, assume defaults and model the P&L hit. That is the only honest board conversation.
What every CFO should lock this quarter
1. Code map and threshold monitor — commodity codes in scope, customs value feed, £50k forward/backward tests, owner in finance ops with customs, not only sustainability.
2. Importer identity — confirm who is on the declaration in each group entity; fix agent vs principal wording before the first tax point in January 2027.
3. Supplier data protocol — contract clauses for verified emissions intensity, system-boundary alignment, CPR form completion, audit rights, and fallback pricing if defaults apply.
4. Systems — link import entries to emissions and CPR evidence; do not leave CBAM in a spreadsheet beside the customs broker’s portal.
5. Accounting policy — when to accrue CBAM, how to treat CPR, inventory costing vs period cost, and disclosure for audit committee.
6. PE / M&A diligence — for any target importing in the five sectors, run CBAM as a hard workstream: threshold history, supplier coverage, verification status, modelled 2027–28 cash tax.
7. EU interaction — watch UK–EU ETS linkage; do not bank cross-Channel relief you cannot evidence under the UK SI package today. Deloitte’s readiness note still frames the supply-chain choices correctly.
HMRC is running agent webinars in October 2026 and will publish rates, default values and further guidance through autumn. Join the list via cbampolicyteam@hmrc.gov.uk. Do not wait for the last PDF before supplier outreach — verification lead times beat your Christmas shipping peak.
Bottom line
SI 2026/995 does not invent CBAM. It finishes the emissions and verification rulebook that turns Budget policy into payable tax from 1 January 2027. July told you how to register, file and relieve; September told you how emissions must be measured and proven. The CFO job is unromantic: instrument the £50k tests, name the liable importer, force verified data up the supply chain, and model default-value economics if suppliers will not play.
If your board still files CBAM under “net zero narrative,” move it to tax, customs and working capital before the first January landing. The carbon price on the import is about to become as real as the duty line beside it.
Sources: SI 2026/995 · policy summary · CBAM collection · Agent Update 147 · Finance Act 2026 · SI 2026/802 · SI 2026/809 · System Boundaries · KPMG · Deloitte · record-keeping